Silicon Valley Watcher - at the intersection of technology and media

By Dave Stubenvoll, Co-founder and CEO of Wowza Media Systems.

The recent introduction of Apple's iPad has re-opened discussion around Flash and Flash support, or rather, Apple devices' lack thereof. While this discussion brings to light the conflict between the two corporate agendas of Adobe and Apple, it isn't really about Flash or a methodology that Apple picked for video delivery. What it does begin to lay out, however, is a much larger discussion about online video. The discussion widens even further as supporters of alternative technologies and approaches like Silverlight, HTML5, and others begin to chime in with their thoughts on the current and future states of online video.

While each approach has its merits, all of the technology options just mentioned present challenges to the online video industry that may not be obvious right off the bat. One would think that having multiple technology options/platforms would be a good thing for businesses and consumers, and it is, but only when the market dynamics are right for it.

I caught up with Kieran Hannon the other day. He was in the Bay Area for a meeting with the Irish prime minister (he's on the board of Enterprise Ireland) and I realized it had been a good few years since I had last seen him.

He used to be co-managing director of Grey Advertising, then had gone off to Texas to work as VP of Marketing for Radio Shack, and then moved to Santa Monica, in Southern California. He's now working as COO at a promising startup called Sidebar, which has an interesting mobile technology that recommends content based on what people like, very useful for online retailers and others.

Kieran and his family had spent 18 years living in San Francisco, and I was curious what life in Southern California (SoCal) was like.

He said life was good, and that the startup scene was healthy and that there are a lot of media/technology centers there. I often write about how Silicon Valley has become Media Valley, because of all the media companies here (Google, Facebook, Yahoo, Twitter, etc) so it makes sense that SoCal, with its rich media history, would be a fertile breeding ground for media technology startups.

Earlier this week, Mark Suster, a VC based in SoCal, wrote an excellent post about startups in LA. Want to Start a Technology Company in LA?

He makes some great points:

...LA [is] the second largest city in the country with a population if 16 million. We have universities like Caltech, UCLA, USC and many more. We have many seasoned entrepreneurs who have built successful companies here and made a lot of money for investors and themselves. But LA is not Silicon Valley and we don't need to aspire to be so. We will never be Silicon Valley in the way that Toronto will never be Hollywood. But we have a great city for building technology companies.

He goes into details about how LA is not like Silicon Valley.

- Funding is different, there are smaller "A" rounds of around $3m rather than $10m here.

- Recruiting is different. There aren't huge pools of engineers, but it is possible to build 100+ sized teams.

- Commuting isn't as bad as people think it is, most people live close to where they work. And hey, commuting isn't that easy here.

- Lots of content creation skills. This is an interesting point to make because software engineers can be found almost anywhere in the world today, but content creation skills are very culture specific, you can't outsource this work.

- There are now larger numbers of successful entrepreneurs, many are on the their second and third successful company.

Here are a few success stories:

There is a lot of innovation happening in LA from places like Eqal, Deca.TV, DemandMedia's studios, Clicker, Filmaka and other initiatives.
. . .
The whole category of "sponsored search" came from a successful LA company, Overture. (my firm, GRP Partners, was an investor). LA produced Applied Semantics that created AdSense and was bought by Google. We were also an investor in the early local listing company, CitySearch - an LA company. LA was a leader in lead generation (LowerMyBills), comparison shopping (PriceGrabber, Shopzilla), social networking (MySpace ... I know, I know - Facebook won - but it was still a big business). If we extend a bit North up the coast line we have many affiliate marketing innovators including ValueClick, Commission Junction and FastClick. They also produced GoToMeeting and CallWave.
. . .
A great team from MySpace has created Gravity. Gil Elbaz from Applied Semantics has now created Factual. Zorik Gordon is tearing it up at ReachLocal. TechCoast Angels backed GreenDot should be a major IPO this year. Frank Addante has created Rubicon Project. Douglas Merrill, the former CIO of Google, is building his next company in LA. Scott Painter, founder of CarsDirect has created two new generation LA startups (Zag and TrueCar, both backed by GRP Partners). Brett Brewer (ex MySpace) has AdKnowledge, there is Adconian, Legal Zoom and many more. Hautelook, Gogii, Magento - all very high potential companies building in LA.

Mr Suster is one of the organizers of Launchpad LA V2, which was announced today. This is a project aimed at helping first-time entrepreneurs and helping to educate them and guide them in building successful companies.

We will be selecting 10 startup companies to participate. There is no cost but you must physically be based in or move to Los Angeles for the 6 months of the program. Applications are due April 6th, 2010, the form is on the website and the Twitter address is@launchpadlad

A West Coast corridor of innovation...

It won't be long before we have a West Coast corridor of innovation stretching from Silicon Valley to Southern California, and beyond.

In fact, if you fly from San Diego heading north along the coast you pass over tons of innovation centers:

- The communications and biotech industries of San Diego;

- The electronics industries of Orange County;

- The media centers of Hollywood and Santa Monica;

- Then you reach San Francisco/Silicon Valley with its electronics, software, media tech, biotech, cleantech industries;

- Then Portland with its thriving startup scene plus Intel's big presence there;

- Seattle with a thriving tech scene mostly spun out of Microsoft, and Amazon;

- Vancouver and its software industry.

Wow. 1400 miles of innovation. There's no other region like it, hundreds of miles of world-class, industry leading, innovation and creativity.

Interestingly, it's all built on top of one of the most unstable fault lines in the world. A disruptive reality. Is there a connection?

I've always said that innovation has to be disruptive otherwise it's not innovation.

Robert Andrews is puzzled. Why Are Russians Spending Like Mad To Save Journalism? | paidContent:UK

He writes:

The latest - after last year buying France-Soir, the country’s smallest daily, for €50 million, shipbuilder’s son Alexander Pugachyov is now spending a further €20 million on a marketing campaign to take it mainstream. He’s upping the print run by 20 times, has halved the cover price and has more than doubled newsroom staff from 40 to 100.

Jealous? There’s no part of this that makes immediate sense. In fact, contrasted with the cutbacks, climbdowns and contraction many parts of the industry are seeing, it looks like madness.

...

The Pugachyov scenario in France mirrors that of Alexander Lebedev in the UK ... The former KGB agent took the London Evening Standard, whose circulation was falling, off DMGT’s hands for just a nominal fee, forewent cover-price income in favour of free distribution on a higher print run, and pledged a £25 million investment over three years.

“£25 million investment??” That’s unheard of in today’s news publishing economy... Now Lebedev’s set to repeat the act by buying The Independent.

I think I can help Mr Andrews understand what's going on. It has nothing to do with "saving journalism."

These are prominent publications in their country. They are being bought not to make money but as vehicles to influence politics and society.

It's not the first time this has happened. Hearst used his newspapers for political influence, and many others have done the same.

Investing in propaganda...

The Russians, in particular, understand the power of media. At the heart of the Bolshevik party was its newspaper, Pravda.

The Bolshevik party wasn't investing in journalism when it funded and published Pravda -- it was investing in having its ideas discussed in society, and in the political realm.

These are ultra-rich individuals, they aren't buying the publications as investments in that business, but as an investment that will aid their other businesses.

Mr Andrews notes that Alexander Pugachyov is the son of a Russian shipbuilder and that the French government may place an order for four battleships. I think that's a pretty big clue that the investment isn't about "saving journalism."

Media businesses are often loss-leaders that help drive other businesses. You see this today a lot. Most online media sites, especially blogs, don't make money from online advertising but from selling other things, such as services, or research reports, hosting events, etc. You don't make money directly from the traffic.

- - -

I already have a loss leader, I just need to add services and products that I can sell to help support my journalism. That's why I've started to do some consulting for companies such as Intel, Pearltrees, SAP, and others.

Let me know if you need some help on media/business strategies - 415 336 7547.

Reuters reports:

President Dmitry Medvedev on Thursday announced that Russia would build a high-tech hub near Moscow to spur modernization of the economy and reduce its dependence on oil and gas.

The center, designed to develop five priority sectors -- energy, IT, telecommunications, bio-medical and atomic technologies -- will be built near Skolkovo, a new private-sector business school in the Moscow region.

(It would be tempting to call it "Silicon Steppes" if it were in Asiatic Russia...)

I had a very small part to play in this story. In late 2007 I met with a large Russian delegation that had come over to Silicon Valley to learn some of its lessons. Their goal was to use Russian oil money to establish several Silicon Valley-like regions.

They asked me lots of good questions. They made it clear that they did not want to replicate Silicon Valley, they wanted just the best bits.

I told them I would tell them the secret of Silicon Valley's success. They went silent, and leaned in closer to hear what I had to say. "Failure."

(This was before the EPIC Fail craze of recent times...)

Silicon Valley tolerates, and funds, massive amounts of failure. Only about one out of twenty startups succeed.

Probably no other culture allows people to fail as many times as Silicon Valley. Inside every successful Silicon Valley entrepreneur is a failed entrepreneur.

No other culture in the world, (except for maybe Las Vegas), tolerates and celebrates as much failure as Silicon Valley. This is the "best bit" of Silicon Valley, and its also the part that can't be exported.

They nodded. And they made some notes.

I asked them about how they would structure their VC funds, and about the Russian entrepreneurs that they hoped to attract.

One of them, the head of a quasi public/private VC fund, said that they had a problem finding and funding startups. It was an exasperating problem. The Russian entrepreneurs won't tell them about their business ideas.

They don't trust them. "I'm running a VC fund, I'm not going to run off with their business idea!"

- - -

By the way, did you know that Tim Draper, one of our most successful VCs, penned a song called "RiskMaster" to welcome the Russian delegation?

I have no idea what the tune is, obviously something stirring, I can imagine something between Red Army choir and Welsh choir:

Hey! You want to start a business?
Russia seems to show some promise
While weighing all your choices
"Go to Moscow!" you hear voices
Google founder came from Russia
Parametric? - Not from Prussia!
Genesis and PayPal too

SVOD and what is new?
With luck you'll become a
Master!

From Soviet biology
Comes really cool technology
Software immunology
From Nukes we get ecology
Ukraine's Orange Revolution
Good for all-freedom solution
And then political pollution
Now it's all in execution


Chorus:
With luck you'll become a
RiskMaster!

All you need is a faster chip
A million rubles
A couple of engineers
RiskMaster!

- - -

Please see: Turning Oil Into Innovation: Russian Delegation Seeks Silicon Valley's Lessons - SVW

I recently wrote about Twitter's business model as ultimately enveloping ever greater parts of its developer community. [Twitter Is The Black Hole Of The Twitterverse...]

After all, why leave money on the table? Why not produce the best desktop client, or mobile client? Why let others build lucrative businesses out of your community?

That seemed to be the way things were moving for Twitter after one of its engineers Tweeted:

"If you had some of the nifty site features that we Twitter employees have, you might not want to use a desktop client. (You will soon.)"

Khris Loux, co-founder of JS-Kit Echo, a commenting service, writes that Twitter has a choice of being a tyrant, or a benevolent king.

How Twitter Can Become A New Breed Of Technology Company | paidContent

Twitter has an opportunity to create either value or angst for the developer community. The Twitter platform has led to countless third-party innovations, resulting in a rich set of applications that enhances the core platform. And Twitter has publicly encouraged these developers to join in the “gold rush” of opportunity and build businesses on its platform.

Indeed, the staggering growth of the service and a healthy ecosystem of complimentary applications have made Twitter a sort of benevolent king.

Now the hard part: building a business without becoming a tyrant.

Twitter’s recent release of Twitter Lists, for example, undercuts the work of partners like TLists and shows the tightrope that Twitter (indeed all proprietary platforms) must walk to both grow their core platforms while also making sure that developers have an incentive to build on top of those platforms. Twitter’s failure to strike that balance could alienate a prime engine of its long-term value and growth.

Well put. But where is that balance?

How does it balance making money and letting others make money too?

How much money is it appropriate to let others make from your platform?

A young company such as Twitter, doesn't have the time to exploit all the business opportunities. That's why third-party developers have moved quickly to generate a plethora of Twitter apps: desktop clients such as Seesmic and Tweetdeck are two top examples.

But why let others profit from your community?

Twitter has investors, its management has a duty to maximize shareholder profits. And with each new round of investors, Twitter has to be able to promise new revenue growth.

Where's that going to come from?

It will come from looking at its developer community and seeing where the low hanging fruit is, where maximum bucks can be made from minimum development costs.

Twitter can decide to buy a business or develop a look-a-like. That's a simple decision: cost to buy the business versus development costs and time-to-market.

This is the way the way the world works, and it has nothing to do with being a tyrant or a benevolent king.

If you have a profitable business you will attract competitors. If you have a successful Twitter apps business, if it's not Twitter coming after you, it will be other developers.

If your business is small enough, it's probably not worth the development costs for Twitter to replicate it.

So the message to developers is: don't make too much money from your Twitter apps otherwise your star will be sucked in and extinguished by the black hole at the center of the Twitterverse.

I was glad to see Joel Postman's post on his Socialized blog: Social Media Isn’t Conversation, It’s Publication because this has been a subject close to my heart.

Joel writes:

...I mentioned one of my favorite Marshall McLuhan quotations, “Publication is self-invasion of privacy.” We threw this idea around a little and together came up with the idea that online communications are a form of publication, not conversation, and a failure to understand this distinction can be troublesome...

I agree, social media is about publishing, not conversations.

About a year ago, I wrote about "The Myth Of Online Conversations: Lots Of Chatter But Not Much Discourse

What is so striking about the online world is how little conversation takes place, how little two-way communication happens.

One comment to an article is not a conversation. 300 comments on an article is not a conversation.

Yet everyone talks about social media being about "conversations." A PR firm I sometimes work with is called "The Conversation Group."

Social media is not about conversations it is about publishing.

Social media represents the fact that we have now wired up the other end of the Internet, your end.

The Internet enabled us to publish to any computer screen no matter where. Now, any screen can publish back. This is huge.

That's what social media is about. It's about publishing, allowing anyone to publish back. It's feedback, it's a response, it's not a conversation.

A printing press in your pocket...

What is extraordinary, is not the 'conversational' nature of the Internet, but the fact that now every screen is a printing press.

I can publish from any screen, small or large, yours or mine. I have the equivalent of a printing press, with the potential to reach of tens of millions, in my pocket. And so do you.

It's no wonder Rupert Murdoch is pissed. You used to have to be a media mogul to have a printing press.

It's not the content...

Let's not get distracted by the content, the endless Tweets about inane things, the blog posts about nothing-in-particular...

The content is not the message. The message is that we now have an online printing press, (and TV studio, and radio studio) nearly anywhere, and everywhere we are. That's huge.

Internet 1.0 was about being able to publish to anything with a computer screen. Now, anything with a screen can publish back.

That's what social media represents...the 'me' in media.

We've wired up the other end of the Internet. It's a two-way Internet now. This is the Internet on steroids.

If you thought Internet 1.0 was amazing, you ain't seen nothing yet.

The Internet is huge but it's a hodgepodge of hundreds of thousands of smaller, private networks, connected through thousands of Internet Service Providers (ISPs) and dozens of backbones operated by the large Telcos and service providers.

Moving data from one end of the Internet to the other can mean traveling across many different computers and different networks. Some of these computers and networks are old and inefficient while some are modern and very efficient.

They are all tied together into what we call the Internet, through a collection of standards. These standards determine how a packet of data can reach its destination, complete and undamaged.

Many large Internet companies own large chunks of the Internet through building their own data centers, networks, backbones, etc. This helps to keep their costs down.

Google is big...

Google is one of those companies that owns a large chunk of the Internet. It has more than 50 data centers around the world; it builds its own servers; it operates its own backbones that shuttle huge amounts of data across the world; it develops its own software for managing all of its data; it keeps banks of servers in the data centers of ISPs so that it can cache data closer to delivery; and more, much more.

How big is Google? asks Arbor Networks. It's a rhetorical question because Arbor knows, it sells network control and monitoring hardware used by the largest ISPs and corporations.

Arbor says that Google is very big:

I mean really big. If Google were an ISP, it would be the fastest growing and third largest global carrier. Only two other providers (both of whom carry significant volumes of Google transit) contribute more inter-domain traffic. But unlike most global carriers (i.e. the "tier1s"), Google's backbone does not deliver traffic on behalf of millions of subscribers nor thousands of regional networks and large enterprises. Google's infrastructure supports, well, only Google.

Based on data from 110 ISPs collected in the summer of 2009, Google was responsible for as much as 10% of all Internet traffic.

If a company wants to compete with Google on a large scale, the costs of shuttling data packets around, whether they be Twitter packets or video packets, starts becoming very important at these large scales.

Arbor says:

The competition between Google, Microsoft, Yahoo and other large content players has long since moved beyond just who has the better videos or search. The competition for Internet dominance is now as much about infrastructure -- raw data center computing power and about how efficiently (i.e. quickly and cheaply) you can deliver content to the consumer.

And that's why Google has focused on building the most efficient, lowest cost to operate, private Internet. This infrastructure is key to Google, and it's key to understanding Google.

The cost of aluminum...

Google will locate its massive data centers where electricity costs are low, such as where there is hydro-electric power. There's a shortcut to finding these locations, look for places where there are aluminum smelters -- these use huge amounts of electricity.

[Back in 2005 I was tipped off by a source that Google was looking at places for new data centers, related to aluminum smelters. But I was unable to write about it directly. I put the scoop in the form of a cryptic sentence and called it a "Crypto-Scoop."

GOOG is prophetic, rather than superstitious,
about its interest in places of power,
associated with the 13th building block of the Original Design.

(Aluminum is the 13th element in the periodic table - a fundamental building block of the Universe.) I have no idea if anyone worked it out :)]

Power and computing costs...

Google knew back then that electric power costs would be important in determining the cost of data centers. Today, it is high on the list of priorities for all data centers. That's also why it has been investing in power generating technologies, such as wind, sun, and geothermal.

It has a key goal of generating electric power from renewable energy sources at a cost less than coal-generated electric power. That would be an incredible achievement.

Always lower costs...

Google always focuses on finding the lowest costs even though it can easily afford to pay more. Google builds its own servers, made from off-the-shelf low cost components, with cheap hard drives. It has developed its own software that deals with component failure and moves work loads across huge numbers of servers. Managing failure is built into Google's data center operating systems.

It has bought up lots of "dark fiber," at a very low cost. This is optical fiber that hasn't yet been 'lit' but it is in the ground, in place, ready to be hooked up.

Because Google has so much fiber, it operates one of the largest backbones in the world. It also means that it can trade bandwidth with others.

Large Telcos and ISPs have peering arrangements with each other. This means that if they have the capacity, they will carry extra traffic for each other. These peering arrangements mean that Google's bandwidth bill for all that YouTube video is zero.

It's difficult to believe, but your bandwidth bill to watch a YouTube video is more than Google's. Because of bartering through peering agreements, its only cost is in maintaining its own networks and backbones.

Skipping the last mile...

Google still needs ISPs and Telcos for the last mile, to deliver its various services and products, to the end user/consumer. But it has been experimenting with going direct.

It has experimented with free municipal Wi-Fi, and more recently, it is setting up high speed bandwidth to communities with 500,000 people or less.

This doesn't necessarily mean that Google wants to become an ISP or a Telco. It is not a service organization and it doesn't want that headache, but it does want to spur ISPs and Telcos to develop high-speed data connections, so that it can deliver future products and services that require high speed data.

The Internet is becoming ever more Google's...

Googles growth means that it is building a much faster, and much more power efficient, and much greener Internet. And through peering agreements, it is carrying much more than just Google traffic, it is quickly, and quietly becoming an important carrier for all Internet traffic.

There are huge indirect benefits from Google's work that make the Internet a better service for every Internet user.

Essential facility...

What will this lead to? It's going to lead to regulatory scrutiny because Google will be increasingly seen as an 'essential facility' vital for the economies of regions, nations, and entire trading blocs.

Increased scrutiny by governments, and regulatory bodies, will make it more difficult for Google to execute on its business strategies. Combined with the increased scrutiny of Google's acquisitions by the Federal Trade Commission, Google's future ambitions will become ever more restricted.

Google sees the writing on the wall. It has boosted how much it spends on lobbying in Washington. [Antitrust Heat -- Google Spends Millions To Influence Washington - SVW]

A layer cake business...

Google might decide that its value lies in its incredibly efficient infrastructure, which is far more efficient and lower cost than the Internet as a whole.

Once you have the lowest cost infrastructure, you can layer and scale other business services on top. Such as payment systems, basic voice and data services, security systems, and commerce platforms (advertising).

Google might decide it doesn't need to own a Facebook, Twitter a Yahoo, or an Amazon -- when it can host all the data packets. It can carry and trace a data packet from source to destination and back again -- it can mine all that transactional data. That's extremely valuable.

It's a little known fact that Google keeps all of its data, all transactional data. It erases part of the identifiable meta data, but that can be reconstructed. [Google Keeps Your Data Forever - Unlocking The Future Transparency Of Your Past - SVW]

That transactional data is incredibly valuable, and even though we can't unlock it to its fullest value today, Google is working on it.

No umbrella...

By being able to build the most efficient, private Internet, Google makes it extremely difficult for any competitor to challenge it. There is no 'price umbrella' that competitors can use.

For example, there used to be lots of mainframe computer companies because IBM, the largest mainframe computer maker, used to charge very high prices. There was a substantial price umbrella set by IBM that sheltered competitors, and allowed them to sell IBM compatible mainframes and still make a good living.

You can see similar price umbrellas in other business sectors.

Google has made sure that by building the most efficient, lowest cost infrastructure, there is no price umbrella that could be exploited by competitors. It's more like a manhole cover, try to get under it, and you fall into a hole...

This strategy means that Google leaves money on the table, it could make more money over the short-term by creating a price umbrella. Instead, it has chosen a long term business strategy which doesn't give competitors any toehold, let alone an umbrella.

Its stock ownership is set up so that founder's stock has ten times the voting rights of public shares, this allows it to avoid shareholder pressure to pursue short-term business goals.

This all adds up to make Google into a truly formidable force, and one that continually amasses greater powers and influence. 'Do no evil' is the very least it can do.

---

Please see my PearlTree on the 'Google Internet.' [PearlTrees is an SVW client and it's a great media technology that organizes web pages in a visual way.]

It was two years before the iPhone got copy and paste functions. Now, Microsoft says that its Windows Phone 7 Series, won't have copy and paste when it becomes available later this year.

Engadget reported:

Microsoft just mentioned in a Q&A session here at MIX10 in no uncertain terms that clipboard operations won't be supported on Windows Phone 7 Series

And:

Update: We just super-double-ultra-plus-confirmed this with Microsoft -- Windows Phone 7 Series will not have copy and paste functionality. There is a data-detection service built into the text-handling API that will recognize phone numbers and addresses, but Microsoft says most users, including Office users, don't really need clipboard functionality. We... respectfully disagree?

I agree with Engadget. Copy and paste makes life a lot easier, it saves having to rekey data from one application on the phone, to another.

Apple first ran into problems, and now Microsoft. It could take years before it's added to Windows Phone, says Engadget.

Copy and paste must be a very difficult technical problem on smart phones, and I have to admit, that I don't understand the scale of this problem.

Microsoft said it plans to spend $9.5 billion on research and development this year, which is $3 billion more than its closest rivals. I hope a few billion dollars of that budget goes on solving the copy and paste problem. Microsoft could gain a significant lead over Apple.

This week marks the one-year anniversary since the Seattle Post-Intelligencer newspaper stopped printing on paper and moved completely online. http://www.seattlepi.com/

Monica Guzman, at the Seattle PI, has written an excellent roundup of how other digital news ventures in the Seattle area are doing.

Here are some extracts from: New media ventures blossom in Seattle

West Seattle Blog
Independent neighborhood news site covering West Seattle.

The site is profitable, and more than 60 paying businesses known as sponsors support it, editor and publisher Tracy Record said.

...Apart from having to beat down an early stigma that independent news "bloggers" were not to be taken seriously (she's a journalist, so she prefers you call her that), Record didn't take a vacation until August 2009, when she could pay enough freelancers to keep an eye on things back home.

"All the people who send story ideas, crime reports, texts about traffic, a picture of a cool event at a school -- that's the part that grows exponentially," Record said. "That's the part that's always humbling, every day."

Techflash
Tech news site owned by The Puget Sound Business Journal.

"It's not something I imagined I'd ever be doing back when I was in J-school (journalism school)," said Bishop.

"It shows you can be entrepreneurial and still be a journalist."

"Journalism isn't only about giving a community information. It's about helping to build that community up."

"I laugh when I think about coming into the Seattle Post-Intelligencer at 9 and leaving at 6. It's almost comical. Twelve hours a day is probably the norm."

Neighborlogs
Seattle-based community news platform and ad-sharing network.

"We see room for something that lets people be journalists, lets people focus on newsgathering, lets us worry about the technology," said Carder.

"The cost of content is so high, you have to find ways to pinch technology and all the tools as tightly as possible. Plenty of players will be gone because they don't know how to do that," he said.

Next Door Media
Seattle collaborative community news network.

"We believe there's a natural balance between journalism and the community. For too long journalism hasn't listened, and it really caught up with the industry," said co-founder Cory Bergman.

"A lot of companies take a tech approach. We're taking a more people-centered and community building approach."
All Next Door Media authors happen to have either worked in journalism or have a journalism degree, Bergman said -- though that's by no means a requirement.

PubliCola
Seattle civic and cultural news site.

"We are reporters who are changing blogging, as opposed to blogging dumbing down reporting," said Feit, a longtime political writer.

InvestigateWest
Northwest nonprofit investigative reporting shop.

"Our model is to sell in-depth journalism at the price that existing news outlets would pay for plain old journalism," said Robert McClure, the Northwest reporting shop's chief environmental correspondent and one of several former Seattle Post-Intelligencer reporters behind the nonprofit.

"It's kind of scary," McClure said. "You're a little mouse on a wheel. You've got to keep going. You can never relax and say, 'We have enough.'"

"I just can't believe that people in this country are going to let in-depth journalism go away completely," he said. "To what degree we can sustain what we have and modernize it in a way that gets the public engaged and keeps them engaged -- that's the big thing."

Crosscut
Northwest nonprofit news site.

... if you want short, flashy treatments of tough local issues, you're in the wrong place. The site's often lengthy analytical pieces aim for a certain audience...

Crosscut is out to activate local discussion ..."Our tagline, 'news of great nearby,' is partly an attempt to say that local can be big local," Brewster said. "We want to have people feel like they're a part of something big."

You can read the whole of this excellent report here: New media ventures blossom in Seattle
(I think my headline is better :)

Most journalists I know can barely type, they certainly can't spell but they can tell a great story.

Most professions have to continually upgrade their skills yet I know lots of journalists that are very reticent about adding new skills. They hate to shoot photos, or video, or edit the video. I know a journalist that does not know how to upload a photo!

Carrying a pencil and a notepad is not enough, journalists need to know how to produce media content in a variety of ways.

Here are ten basic skills journalists, heck, anyone should know:

1 - How to shoot a photo with a digital camera and transfer it to a computer for a quick edit.

2 - How to upload an image to a web site in the right format and size.

3 - How to add a hyperlink to a word or part of a sentence by hand. (i.e. hyperlink)

4 - How to quickly shoot digital video and do a quick edit and upload it to a hosting service such as YouTube, in the right format.

5 - How to embed the code for a video in a web page and resize it to fit the page width.

6 - How to capture audio for a video, or just an audio-only podcast, so that the audio is clear and background noise is minimal.

7 - Know some basic HTML and what it does so that common problems with a web page can be quickly fixed.

8 - Know some basic CSS (Cascading Style Sheets) and what it does, and be able to quickly fix any problems with a web page.

9 - Know how to promote your content on the Internet without alienating contacts and family.

10 - Know how to get used to an always-on work day that often extends beyond 9-to-5, and produce three times as much digital media content as you think you can, while maintaining high standards of quality and accuracy.

The Guardian.uk has an article about how the New York Times and CNN are becoming technology companies.

How the New York Times and CNN try to keep up with the tech companies

"The New York Times is now as much a technology company as a journalism company," its executive editor Bill Keller said recently.
...
While CNN.com closely collaborates with technology companies like Facebook, Apple or Google, the New York Times anticipates technical change in-house with the help of its research and development department.
...
"We made an experiment and put an RFID chip into the phone, the computer and the television. The chip was there to track the user's reading. When a user stopped reading a story on the phone as he or she arrived at work, it opened it again on the desktop. When the user entered the living room, related videos to the story were presented on the television screen," explains the NYT's Nick Bilton.
...
CNN has launched an iPhone application, redesigned its website and reached out more to social media. CNN was among the first TV broadcasters to understand the full impact of social media on television, and teamed up with Facebook for the presidential inauguration.
...
Today, CNN's iPhone app is as much a news-making as a news delivering application, and as the iReporters can add their telephone number, email and location to their report, CNN's editors can get back to them or even assign them to certain content CNN is looking for.
...
...it looks like the news organisations that tear down the wall and build a bridge between editorial and technological thinking will be most likely to survive.

I'm glad to see these types of stories. For the past five years I've been writing about the need for 'media engineers' - part software engineer and part media professional. And also 'media architects' the people the create the media technology infrastructure for media companies (BTW every company is a media company.)

Media engineers will be better paid than software engineers because you need a broader skills set.

- - -
Please see my PearlTree on 'media engineers.' [PearlTrees is an SVW client and it's a great media technology that organizes web pages in a visual way.]

SAP's new co-CEOs today promised faster software innovation and better execution on a hybrid enterprise software model that includes cloud computing and traditional enterprise software.

SAP, which describes itself as the world's largest business software company, recently reshuffled its top management replacing CEO Léo Apotheker with Bill McDermott, who was head of field organization, and Jim Hagemann Snabe, who was head of product development.

Their appearance at the SAP Silicon Valley center was their first joint press/analyst conference since the announcement of their appointment in early February.

Here are some notes from the press conference:

- Business by Design, the cloud computing offering, has been slow getting off the ground but has been successful in terms of software quality. The development team has been using agile software techniques which has reduced development team size by one-third and produced higher quality software than expected.

- SAP continues to believe a hybrid strategy is best, combining the traditional enterprise software business model with cloud computing/on-demand software as a service.

- SAP intends to become the number one on-demand software company in the world. It sees huge opportunities in the Chinese market.

- This summer there will be a major new release of the Business by Design software service and will be followed regular improvements every five weeks.

- Oracle was criticized for not being innovative. It's acquisition strategy is not providing any benefits to customers, unlike SAP, which has been investing hundreds of thousands of man-years in innovation, such as enabling customers to take advantage of new features without having to upgrade their systems.

- The new co-CEOs will try to move the company at a faster "clock-rate" than the former CEO. The basic strategy will remain the same but the execution will be faster.

- SAP wants its employees to be excited about coming to work. It is also impressed by its developer community, which is coming up with lots of interesting ideas.

- SAP is not going to follow Oracle's strategy of tying applications to specific hardware, as through its acquisition of Sun Microsystems. But it does want to eliminate the conversation about stacks and focus on solutions.

- Best of breed solutions were criticized, the problem is that "they don't breed well."

- The acquisition of Business Objects was important in broadening SAP's view of the software world. It sees the future as enabling customers to work with many different companies and allowing their corporate systems to easily interact with their business partners.

- SAP justified the maintenance fees being paid by customers because the company is innovating across industry sectors.

- Innovation was a frequently used word during the Q&A but it wasn't clear what this meant or what it would look like.

Google's [$GOOG] opposition to the Chinese government over censorship of the Internet is making life difficult for its partners in China. The New York Times reported Sunday, that Chinese officials have sent warnings to Google's Chinese partners that they must obey the law.

Chinese government information authorities warned some of Google's biggest Web partners on Friday that they should prepare backup plans in case Google ceases censoring the results of searches on its local Chinese-language search engine, said the expert, who did not want to be identified for fear of retaliation by the government.

China's most popular Web portal, www.sina.com.cn, features the Google's search box in the middle of its home page. Ganji.com, another highly popular Web site, displays Google's search box in its upper-left hand corner.

Even if Google's partners stop featuring the Google search engine, just being associated with Google, in any way, could be bad for business. The Chinese government has great powers over the commercial sector and because of Google's opposition to China's laws, it could consider Google's allies to be adversarial simply by association.

The Chinese authorities are not predisposed to negotiating with foreign organizations over changing their laws. There are bad historical precedents of foreigners forcing changes in Chinese laws that have led to massive disruptions in Chinese society. The British are notorious for forcing the Chinese to pass a law that legalized opium use.

Backlash against employees...

On Saturday, the Financial Times reported that Google is concerned about a government backlash and retaliation against its Chinese employees.

The retaliation could take the form of narrowed employment prospects for Google's Chinese staff. Having Google on a resume could be perceived negatively in China, where there is a strong sense of national identity and a long tradition of suspicion of foreign organizations.

Just a few months ago, Googlelost its head of Google China, Kai-Fu Lee. Did he see the writing on the wall as Google founders, Larry Page and Sergey Brin, grew increasingly concerned about Chinese censorship?

A government backlash could potentially be extend to Google's Western business partners . For example, in early February, Reuters reported that Google is part of a Disney-led consortium seeking to buy a $100 million stake in Bus Online, a Chinese digital advertising company. Such deals require Chinese government approval.

It will be interesting to see if Google's membership of this consortium sinks the deal, or if it is asked to leave.

Beyond China...

The Chinese government could potentially punish Western companies for simply being associated with Google in non-Chinese markets.

Even just a rumor of such discrimination could quickly affect Google. With the Chinese Internet market exploding, many foreign firms are trying to build a presence in China. If those corporations fail to win Chinese government approval for their business ventures, they will lose out on sharing in the world's largest and fastest growing Internet market.

Western companies have already given Google the cold shoulder. Earlier this year the search giant asked other companie to come forward and admit they had also been hacked by Chinese agents. Intel was one of more than 30 companies hacked about the same time as Google. Although Intel admitted to the hacker attack, it denied any Chinese connection.

It's clear that Western companies already see disadvantages in siding with Google.

What is Google leaving...

The McKinsey Quarterly just published an article titled: "China's Internet obsession" [free registration] looking at the Chinese Internet market that Google will leave behind.

Here are some extracts:

...by the end of 2009, the number of Internet users in China had touched 384 million, more than the entire population of the United States. That's an increase of around 50 percent over 2008. Moreover, 233 million Chinese--twice as many as in the previous year--accessed the Net on handheld devices, partly because China's cellular providers started offering 3G services widely last year.

...

People in the 60 largest cities in China spend around 70 percent of their leisure time on the Internet, according to a survey we conducted in 2009. In smaller towns, the corresponding number is 50 percent. The PC is fast replacing the TV set as an entertainment hub...

...

One in five consumers between the ages of 18 and 44 won't purchase a product or service without first researching it on the Internet. They shop online at auction Web sites such as Taobao, paying for products and services with prepaid Taobao cards that the post offices sell for a small commission. The volume of e-commerce in China more than doubled last year.

...

Seismic changes are likely to take place in the Chinese consumer market because of the Internet--and we aren't talking just about the fact that 50 million Chinese may soon have to stop using their favorite search engine, Google.

It is commendable that Google values a censorship-free Internet above the value of the Chinese Internet market. Even if Google has just a 30 per cent of the Chinese search market, it's still a very significant share of a highly prized market. The behavioral data alone could be used in other markets.

It remains to be seen if Google's principled stand in China has consequences for its business outside of China.

The Federal Trade Commission (FTC) appears to be stepping up its scrutiny of Google and anti-trust issues related to its business. Bloomberg reports that the FTC is asking for sworn statements from competitors and advertisers.

This action usually precedes the filing of a lawsuit seeking to block the $750 million AdMob purchase announced in November.

Agency officials typically collect declarations “when they think there is some significant chance” the agency will ask a court to block a merger, or seek to modify a deal, said Stephen Calkins, a former general counsel at the FTC who is now a professor of law at Wayne State University’s law school in Detroit.

You can bet that Microsoft is happy to testify about this deal. Microsoft has a lot of experience with anti-trust and can craft its complaints in a language that FTC's lawyers can understand.

Scott Cleland, writing on The Precursor Blog, predicts that Google is likely to withdraw from the deal before the FTC files a complaint.

The last thing Google wants to do is have its own actions or recalcitrance be the catalyst for a much broader and more serious antitrust crackdown on Google's rapidly proliferating anti-competitive behavior.

For Google, it means it has to rethink not only its mobile ad strategy but also its acquisition strategy. It will be very difficult for Google to make large acquisitions in the future. But trying to grow its businesses organically, will reduce its ability move quickly, and dominate new markets. Which is precisely what the FTC means to do.

At some point, Google may decide to make a stand and challenge an anti-trust complaint. But it will have to choose its battleground carefully, because it will lay itself open to anti-trust lawsuits from other businesses, it will need solid footing.

Google's difficulties in making acquisitions bad news for the VC community. With very few IPOs around, acquisitions have become the main exit strategy for many venture-backed companies.

- - -

Please see: Nine years later does Google still need 'adult supervision?' | Tom Foremski: IMHO | ZDNet.com

Marc Andreessen, the co-founder of Netscape, likes to give business advice to media companies. For a couple of years, he has been advising newspapers to completely abandon print. He said it again in a recent article. Alan Mutter, a former reporter, and successful media entrepreneur, writing on "Reflections of a Newsosaur" says the idea is "plain nutty."

Marc Andreessen had a really good idea when he invented the first popular browser for the web, but his latest notion – that newspapers should walk away from a business grossing more than $30 billion a year – is just plain nutty.

I agree. Newspapers can't abandon print when their online revenues are less than 5 percent of total revenues. Google's chief economist Hal Varian presented a bunch of dismal figures for the newspaper industry earlier this week.

GOOG's Chief Economist Hal Varian Has No Solution For Newspapers

The newspaper industry is stuck. Moving its business online involves extra costs in terms of needing staff with a variety of web skills, IT costs, etc. Yet the revenues don't match its cost of operations. And there's more...

I remember a conversation with a publisher of a very good IT print magazine. He told me he was thinking of stopping advertising on his web site. I was flabbergasted, how could you do that?

He said that he offered online advertising packages to his print advertisers. But when his advertisers looked at the poor click-through rates they assumed that their print advertising wasn't effective. So they would pull their print advertising. For the sake of a $600 monthly online ad package they were pulling $50,000 in print advertising.

This also works the other way. Online advertising rates lower than print but can be more effective. For some advertisers, a $600 ad buy can replace $50,000 in print advertising.

You can't get there from here.

It's a Yankee phrase that never made sense to me. But it makes perfect sense in defining the situation of the newspaper industry and its attempts to transition its business online.

There is no way that online news revenues can support the cost of operating newspaper newsrooms. Because the newspaper industry cannot give up print, it leaves the online field wide open to competitors, which have significant advantages:

- no legacy costs of business such as printing plants, unions, pension plans, office buildings, layers of admin.

- new competitors can build news businesses based on the dismal economics of the online world. For example, the extremely successful Huffington Post has fewer full time journalists than the New York Times has people moderating its reader's comments.

Newspapers are forced to watch smaller online competitors run off with the audience. You see that happening with the Gawker media network, and elsewhere too.

The situation is made even more horrible for newspapers because the rates for online ads continue to drop. Yet their costs of operations haven't dropped, they increase as they try to transition to online.

You can't get there from here.

- - -

Please see: Disruptive Technologies Disrupt

James Rainey, at the The Los Angeles Times, reports on the "Bay Area News Project" financed with $5 million by Warren Hellman, a local philanthropist.

The project has a CEO with a $400,000 salary and its editor, Jonathan Weber, used to run the Industry Standard, a popular magazine during the dotcom era.

Bay Area News Project has high hopes, few employees - latimes.com

When the Bay Area News Project launches its website in late spring or early summer, it will be just the latest -- and perhaps the most ambitious -- nonprofit venture among a string of similar start-ups.
...
"On the one hand, you want to have big ambitions," Weber explained from his office, a stylish but spartan space donated by a San Francisco law firm. "On the other hand, you don't want to be presumptuous about what you can do with a small newsroom.
...
The project will have to rely on paid interns from one of its partners, UC Berkeley and the Graduate School of Journalism, to provide some of that coverage. The university also intends to bring an R&D component.
...
Weber has committed to covering public institutions like government, education and the law. But he conceded in a recent meeting with freelance writers that even this civic mandate would be an enormous challenge. And with a couple of other editors likely to come on board in a week or two, he's yet to hire another editorial employee.
...
"I think that in some ways we are kind of entering a Golden Age of journalism," Weber said, "because the barriers to entry have been largely removed."

Foremski's Take: The great thing about emerging new media business models, is if one media organization figures it out - we all figure it out - we can all adapt and adopt a similar model. It's win-win.

But I don't see the Bay Area News Project being able to do that, for several reasons:

- The salaries and the organization. The CEO is being paid $400K, and editor Jonathan Weber has wisely declined to publish his salary. I would estimate it to be between $300K and $200K. The salaries of the other journalists will be far lower, and most will be intern level pay because the work will be done by journalism students.

- The non profit model is a problem. The point is to find a media business model that is profitable. There's plenty of 'non-profit' media businesses around, the largest local one is the San Francisco Chronicle.

- A philanthropist led news business is not a sustainable or reproducible model. Mr Hellman has done wonderful things with his money and his interests in the news business are commendable. But the way this venture is set up, it doesn't look like there will be much to be learned, or adopted, by other news organizations.

- This project will compete with local media organizations that are trying to create for-profit news media business models. Having a very well financed competitor, with it's saintly 'non-profit' status will suck revenues away from them.

We need media business models that are viable, profitable, and self-sustaining - without relying on philanthropists, cheap labor from J-schools, and expensive consultants. That's where Mr Hellman's money should be going, imho, to develop reproducible news media business models.

- - -
Please see:

Here is a PearlTree - a visual organization of web pages related to this story:

  
The Bay Area News Project // FAQ

A new convert to nonprofit journalism out west? » Nieman Journalism Lab

Gabe Rivera's Techmeme is the news reader of choice for much of the Silicon Valley tech-setters -- more so than Techcrunch because it has a much wider selection of articles.

I often see Gabe at press events, he has a press pass like other journalists. But is he a journalist? After all, he doesn't write any of the stories that appear on Techmeme.

It seems that the Austin based conference South By South-West (SXSW) doesn't think he's a journalist because it refused to give Gabe a press pass. Does SXSW think that Gabe's Techmeme is a simple news aggregator and therefore not media?

Probably. But Gabe is not just a software engineer with a news algorithm and a server. He's better viewed as the editor-in-chief of Techmeme with a large staff of editors. Techmeme does use an algorithm to try and surface news that is interesting but that's not enough. He has five editors that curate what appears on Techmeme and its sister sites.

Also, Gabe has told me that he sometimes 'commissions' stories. He will sometimes tell bloggers that he would love to see a story on a particular subject, or he'd like to see coverage of a conference. That's the work of an editor-in-chief, not a software engineer.

So SXSW should definitely give Gabe a press pass. (BTW - Editors are journalists.)

I wonder how long before Gabe's editorial team start writing stories? It would seem to be a natural progression. Look out Techcrunch et al!

This is astounding: ClickZ in the UK reports:

U.K. to Regulate Social Network Marketing - ClickZ

Marketers and brands using social networks will soon find their activities in those spaces regulated by the U.K.'s Advertising Standards Authority, following recommendations submitted by the Advertising Association this week.

The proposed amendment to the Committee of Advertising Practice (CAP) Code - expected to be in force by September - will extend the regulatory framework currently in place for paid online ads to all other online marketing communications. As a result, claims from marketers on their own Web sites and third-party sites like social networks will now be subject to ASA scrutiny, as they are in TV, print, and other forms of online advertising.

The code is designed to ensure that ads do not offend or mislead, and that they respect specific laws relating to the marketing of alcohol, gambling, auto, health, and financial products.

Advertising Association COO Rae Burdon described the extension as "very significant" for online marketers. "There is now considerable marketing activity on social networks, so it's clear that these spaces have to be included in the remit," he told ClickZ.

Wow. If a person markets something, like a book they've written, or a product they are selling, it is regulated as if it were advertising published by a media company, such as a newspaper, TV, magazine, etc.

That means everyone is now a media company. And subject to the same regulations - at least in the UK. Wow.

Those regulations will apply to personal blog sites and also your Facebook, Twitter, LinkedIn pages too. If you claim something that isn't truthful or violates other regulations -- there will be penalties.

Sanctions for breaching the code have not yet been confirmed, but the revised codes are expected to be published this month and will come into effect in the autumn, the Advertising Association said.

But how will the ASA monitor all that social media marketing?

The extension of the ASA remit will of course incur additional costs, and Burdon said the ASA would be "gearing up with additional staff and structures" in the coming months.

The ASA will need a lot of staff, I'm not sure if it knows what it's chewing off. We have just scratched the surface of individuals using social media marketing.

That's what the Obama administration should bring to the US, similar regulations. It would make a great job stimulus initiative. There would be jobs for life, for thousands of people, working as social media marketing monitors ((SMMMs) - pronounced Sock-mee-ma-mo's :)).

I often meet with ad networks and ad exchanges for various stories I'm writing. And because I'm a publisher, they give me the pitch about how publishers make more money with their solution.

The pitch they give advertisers is how much money they can save them.

Clearly, both can't be right. The money has to come out of one pocket or the other. Guess which one it comes out of?

Over on Poynter Online, Dorian Benkoil wrote an article headlined: Can Ad Networks & Exchanges Help Increase Ad Prices (Instead of Driving Them Down)?

It seems he's been hearing the same pitches I hear from ad networks and exchanges.

Tim Cadogan, CEO of ad exchange OpenX, told me that the solution is to "limit the number of airplanes flying" when I shared the airline analogy with him at the OnMedia conference in New York earlier this year.
Cadogan predicted that within the next year to 18 months, we'll start to see technologies that let publishers flexibly manage ad inventory in real time, automatically pulling ad spots from a page when there's not an ad of high enough value to go in. That should, by implication, increase the perceived value of the spots that remain.

That won't happen because:

- there is no scarcity. Publishers would need to combine forces, and strategies, to create scarcity. Then the temptation is to undercut each other and so you are back to square one.

- there's not enough auction liquidity to create a competitive bidding environment.

At the paidContent 2010 conference a few weeks later in New York, JT Batson, executive vice president of revenue and global development for ad solutions company the Rubicon Project, said they were developing such a solution, one he predicted would be available in some fashion by the end of the year. "Flexible inventories will increase rates," he said.

Batson said publishers haven't done particularly well at managing their inventory but will eventually have systems with predictive modeling as sophisticated as the ones airlines have.

Look at how prosperous the airlines have become.

The pitch, when it is targeted at advertisers, goes something like this:

"Surveys have shown that advertisers are over-paying for online advertising by $7 billion a year. Using our technology you can buy ads that are highly targeted to your demographic. Our performance software will let you find the best time for showing your ads. And our auction system means you can buy ads at the lowest price possible. You can buy ads at significantly less than the published ad rates for the publication you want. You will save a ton of money."

It's a zero sum game. It's not win-win when money is involved. Someone wins and someone loses.The ad networks and ad exchanges work for the advertisers -- not the publishers.

Ad networks and ad exchanges have the advantage in that they can pull in lots of inventory from many sites -- scale is on their side and they sell that advantage to the advertiser -- not the publisher.

A publisher, even if it is a national newspaper or magazine, is still a small fish in a very large sea -- it has no leverage. If the publishers were to get together to create scale that benefits them -- that would be illegal, it would be anti-trust.

It's more than advertising...

And all this discussion about advertising and online publications is a red herring, anyway. The dirty little secret is that advertising doesn't work well online. It takes millions of impressions to make a decent number of conversion. Same for clicks, etc.

Yet online publishers are obsessed with trying to make online advertising work. It won't.

Publishers need a multi-revenue business model that includes a whole range of revenue streams: lead generation, events, custom marketing, webinars, virtual currencies, subscriptions, paywalls, etc. But that's hard work. It's much easier to complain about online advertising rates.

- - -

Please see:

The "Heinz 57" Media Business Model

Why Ad Blocking is devastating to the sites you love

Don't Blame Your Community: Ad Blocking Is Not Killing Any Sites | Techdirt

Gabe Rivera, well known for Techmeme, has unveiled a new news aggregator site: Mediagazer (media grazer might be a better name :).

Megan McCarthy is the site's editor (yes, Gabe uses human-enhanced news search algorithms).

Introducing Mediagazer «

The media business is in tumult: from the production side to the distribution side, new technologies are upending the industry. What do news organizations need to do to survive? Will books become extinct? When will an audience pay for content? Can video bring television and the internet together? Will the iPad save us all? Keeping up with these changes is time-consuming, as essential media coverage is scattered across numerous web sites at any given moment.

The site looks a lot like Paidcontent.org, which also covers the same space.

In her post, Ms McCarthy is describing how technology is changing the media industry. And that's what SVW has focused on these past five years : the business of innovation at the intersection of technology and media.

It's not until fairly recently that people recognize "the intersection of technology and media" idea. And I'm glad that this idea has caught on because it is the most interesting aspect of the tech industry and also Silicon Valley.

Silicon Valley turned into a media valley a long time ago.

Google, Yahoo, Ebay, for example, are technology-enabled media companies. They publish pages of content with ads.

Facebook, Twitter, LinkedIn, for example, are technology-enabled media companies. They publish pages of content with ads.

And so are tons of startups... Silicon Valley is a Media Valley.

New York city's media industry is in sharp decline but ours is on the up and up.

Here is a behind the scene look at a Japanese TV team coming to my apartment to interview me about Silicon Valley becoming Media Valley, two years ago in February 2008.

http://www.youtube.com/watch?v=S7sNxTlqIyI

In September 2007 Nikkei magazine, Japan's prestigious business magazine, featured me in a long article about Silicon Valley becoming Media Valley.

Here are some of my posts over the years:

April 2009 - Media In Transition: Silicon Valley Is Driving The Changes . . . And Is Changing

March 2009 - Media Is Dead . . . Long Live The Media!

May 2007 Silicon Valley Watcher - at the intersection of technology and media: Search Results

February 2007 Silicon Valley has become Media Valley - someone should tell NYC - SVW

September 2005 - A Report From NYC

I'm glad that more people now recognize what is going on in Silicon Valley and the importance of what happens at the intersection of technology and media.

Wayne Rosing, when he was VP of Engineering at Google, once told me that Google saves every bit of data from people's searches and puts it onto tapes and ship it off to a storage facility.

Why does Google collect all that data I asked? We don't know, but we collect it all, he said.

Search data is mined to "learn from the good guys," in Google's parlance, by watching how users correct their own spelling mistakes, how they write in their native language, and what sites they visit after searches. That information has been crucial to Google's famously algorithm-driven approach to problems like spell check, machine language translation, and improving its main search engine. Without the algorithms, Google Translate wouldn't be able to support less-used languages like Catalan and Welsh.

Data is also mined to watch how the "bad guys" run link farms and other Web irritants so that Google can take countermeasures.

Google eventually anonymizes the data:

The last octet of the IP address is wiped after nine months, which means there are 256 possibilities for the IP address in question. After 18 months, Google anonymizes the unique cookie data stored in these logs.

This isn't especially ambitious; Europe's data protection supervisors have called for IP anonymization after six months and competing search engines like Bing do just that (and Bing removes the entire IP address, not just the last octet). Yahoo scrubs its data after 90 days.

But this data could still be traced to individual users.

This is what happened when AOL released search data on 685,000 search users in August 2007. The data had been anonymized but it was easy for reporters to find the actual users from clues in their searches, such as zip codes and town names.

You can search for what AOL users searched at these sites:

http://www.aolstalker.com/

http://aolpsycho.com/

The AOL searches revealed a glimpse into the unguarded thoughts of the digital haves.

In one instance, it looks as if a wife and a husband are using the same computer, each hiding their extramarital affairs from the other, then later looking for help online to deal with the pain of a failed relationship.

And there are real soap operas, tracked over a period of months... from the excitement of first meetings:

"how to get rid of nervousness of meeting a blind date 23 Apr, 12:27"

Then disaster:

"if your spouse has an affair should you contact the other person's spouse and let them know : 07 May, 09:58"

And the same user account asks:

"i had sex with my best friend and now he treats me differently :26 May, 13:58"

There are also "how to kill your wife" searches and more.

All this data was anonymized but all the searches from a single computer were kept together and that means they can eventually be traced. A New York Times reporter quickly managed to find one of the searchers.

Welcome to the future transparency of your past.

In the future, there will be vast databases of anonymized data from a variety of sources: search engines, credit card companies, cell phones, geo-location data, etc. It will be possible to triangulate that data, and if one piece of that data is linked to a user, it will unlock everything else.

Yes, it would take quite a bit of data mining but we have the technologies to do it today.

While each silo of information, technically might be anonymous, in aggregate, it would help identify users from their behavior. Each digital interaction throughout your day, whether through mobile, or desktop, or bank, leaves a trace and that can eventually be tracked and matched with an identifiable person.

And Google, with its dominance of your life, search, email, docs, buzz, photos, video, etc, is collecting huge amounts of your behavioral data, and it will be one of the main keys in unlocking your privacy.

Welcome to the future transparency of your past.

I first met Patrice Lamothe, co-founder of PearlTrees in November and became fascinated with the PearlTrees service because of the many ways it can be used, and because it is an example of a media technology that is closely integrated into the way people are using the web.

Since then, I've played around with PearlTrees and I can see lots of interesting uses for this technology, and its potential in creating a giant, curated web, one which goes beyond simple search, and beyond social tagging as in Delicious.

And I'm excited now to be working with PearlTrees, as an advisor, in helping this startup grow to the next level. I'm very fortunate to that I can work with companies that interest me anyway, rather than having to work with companies that don't.

[Full Disclosure: This is part of my media/business strategy consulting services that help finance my journalism on SVW. I'm also part of the "Intel Insiders," a small group of advisors to Intel; Tibco Software is a sponsor; and I've done consulting work for SAP. You can call me at 415 336 7547 if you'd like more information on my consulting services.]

PearlTrees users create a visual metaphor of a pearl and then connected pearls, which are web pages. For example, I created a very simple pearl based on my recent coverage of the Google v Italy court case.

http://pear.ly/kaKn

In this image, you can see some of my research that went into this story because each pearl is a web page with information about the court case. If you click on the link above, it will take you to PearlTrees and you can interact with the pearls. [Very soon, a new version will allow live Pearls to be embedded on any web page.]

It gets more interesting when other PearlTree users grab my Pearls and add them to their account, and then add comments, or add new pearls to the same topic. In this way, a community can collectively add a lot of value to a topic or story.

PearlTrees is still in early beta but it is already very useful in its current version. The beauty of PearlTrees is its simple user interface, and Firefox addons that make it easy to integrate into your workflow. With just one-click, through pull-down menus, a web page can be 'pearled' and added to your topic pearls.

Over the next few weeks and months I'll start sharing some of the Pearls that I create as part of my daily work. And I'll also be highlighting some Pearls made by others.

I expect different communities to use PearlTrees in different ways. And so will individuals. And there are already some patterns emerging.

For example, Patrice tells me that he knows instantly if a PearlTree belongs to a man or a woman. Their shape is different. Women tend to create PearlTrees that are circular in shape, many pearls connected in a radial form, like spokes in a bicycle wheel; while men tend to create tree-like Pearls, with many sub-branches.

And that's what I like about the PearlTrees concept - it is simple enough that it can be used in so many different ways. I'm looking forward to seeing this idea evolve and find its way into many different communities.

People like to talk about disruption but sometimes some people misunderstand the power of disruptive technologies.

I've had companies tell me: "Yes, we know we are in danger of disruption but we see it, we can adapt, we can change and take advantage of it."

Good luck. Even when you can see the train wreck ahead. You will likely slam right into it. Disruptive technologies disrupt. Technologies are not called "disruptive" just for the sake of it.

Niki Scevak, a serial entrepreneur, writing over at Bronte Media, has a nice analysis of AOL versus Yahoo. He says that AOL, under Tim Armstrong and his team, has a more realistic understanding of the advertising markets, and where things are headed.

Carol Bartz, who I am sure is an excellent manager of large companies, seems lost. See Arrington’s article on a speech she gave recently where she said: “she’s counting on an improvement in the economy to drive Yahoo growth”.

Well, let me save you some time Carol: Stop counting. The economy won’t help you...

The second thing that enrages me about that statement is that it’s completely out of her control. And what track record does Bartz have in forecasting economic indicators? Where are the statements related to things under her control?

Mr Scevak says he will short YHOO and buy AOL.

My main reason for thinking this is that AOL has a management team that is in tune with the reality of the Internet. Yahoo has a management team still grasping with the basics of advertising and that’s not mentioning the basics of online advertising.

A better strategy might be to short both because there is a huge disruptive wave moving through the media industry. The disruption is affecting every media business, old and new(er).

AOL might have a better view into the disruption but that's no guarantee of success. Just because you can see the train wreck ahead, doesn't mean you can avoid slamming straight into it.

Look at what happened with the microcomputer/PC technologies. Over a period of about a decade, that basket of technologies disrupted hundreds, if not thousands of companies, in the computer industry. IBM barely survived. It had to reinvent itself as a computer services company.

So many companies, DEC, etc, saw the disruption ahead. But they couldn't change fast enough, they couldn't downsize fast enough, they slammed straight into the train wreck. Some did make it through to the other side but many didn't. Disruptive technologies disrupt.

Even if you see things coming, as the newspaper companies now do, there's sometimes little they can do about it. The Internet is a hugely disruptive media technology and that's where we see the disruption the most.

Newspaper, and other media companies, have to act a lot faster than they are. Many won't make it through to the other side no matter what they do. Disruptive technologies disrupt.

(Oh, and by the way, every company now is a media company, every company is in a disruptive pathway. And here's a plug for my media/business strategy consultancy services, which help me publish SVW - 415 336 7547 or tom@foremski.com.)

Facebook, Twitter, Zynga are hot companies and one day they will make hot IPOs. But what's their value?

It's often difficult to put a value on private companies because their financial data is private. But you can get some sense of their value by tracking the buying and selling of private company shares, and that's what SharesPost does.

The company announced its first value index today comprised of seven leading venture backed private companies.

The private market is where VC and other rich individuals can trade shares in venture-backed companies. You could call it the "smart money."

But you might be in for a surprise as to what the smart money values.

- Zynga, the maker of the Facebook game Farmville, has a $2.61 billion valuation. Twitter has a $1.44 billion valuation. The smart money sees $1.17 billion more value in Facebook games than it does in Twitter.

- According to the SharesPost Index, Facebook has a valuation of $11.52 billion. That's a lot less than the $15 billion valuation it had in October, 2007 when Microsoft purchased a 1.6% share for $240 million.

It's a 23 percent devaluation despite the massive growth at Facebook since Microsoft's investment. And it hosts Zynga's games, that has to add to its valuation.

Here is the complete list of the companies in the SharesPost Index and their current valuation:

Facebook $11.52 billion.

Zynga - $2.61 billion.

Twitter - $1.44 billion.

Linden Lab (Second Life) - $383 million.

LinkedIn - $1.3 billion.

Tesla Motors - $1.28 billion.

Serious Materials (Cleantech) - $227 million.

I'm sometimes asked what the new business model for media will be. My answer is that it will be a "Heinz 57" model. The Heinz food brand often has "57 varieties" in its promotions. And that's a good metaphor for the emerging media business model.

Frédéric Filloux illustrates this very well in his recent post about Fairfax Media, the Australian media giant. The company publishes 328 newspapers, 46 magazines, it operates 284 web sites, and 15 radio stations.

Fairfax Digital, a division of Fairfax Media, represents 10 percent of total revenues and 16 percent of its EBITDA in fiscal 2009.

Mr Filloux notes that:

... when we compare audiences for NYTimes.com and smh.com.au in their respective markets, the Australian news sites has roughly three times the penetration of the NY Times. And if we compare advertising market shares: the SMH is doing twice as well as the NY Times.

And its impressive financial performance is based on multiple revenue streams.

FD had no less than 15 revenues streams: advertising, subscription, commission on auctions, paid by the transformation of a contact, listings, e-commerce, mobile fees, etc. In New Zealand alone, FD’s classifieds and auction site TradeMe serves 70% of all the country’s web pages.

You can read the rest of Mr Filloux's excellent profile here: Digital Takeover, The Fairfax way | Monday Note.

It's a great illustration of how multiple revenue streams are key to the success of future media companies. And each one will have a different mix of revenue streams.

But it is tough to manage many different revenue sources. We will have tools and services that will help publishers to stay on top of things but clearly, we need a new breed of publisher.

It's not enough to lunch out with a few of your top advertisers. Publishers will need to be expert in many different aspects of their business: advertising, content creation, custom marketing, subscription management, lead generation programs, events, syndication, virtual goods and currencies, and more.

Excellent article at the Washington Post by Cecilia Kang about today's Senate Judiciary hearing "Global Internet Freedom and the Rule of Law."

Here are some of the key points from Post Tech - Google says no timetable to leave China; lawmakers tell firms to stand up to censors:

- Google still has no timetable on leaving China.

- Twitter and Facebook were invited to give evidence but refused.

- Twitter and Facebook have refused to join a two-year old Anti-Censorship coalition set up by Microsoft, Google and Yahoo.

- Senator Richard Durbin, the assistant majority leader, is planning legislation that will require US Internet companies to uphold human rights abroad.

"With a few notable exceptions, the tech industry seems unwilling to regulate itself," Durbin said. "I will introduce legislation that will require Internet companies to take reasonable steps to protect human rights, or face civil and criminal liability."

"In a statement, Facebook said it is still small, with few operations abroad."

Wow. Facebook said it is still small?!

On February 10, 2010, Facebook said it hit a milestone: 100 million users on Facebook Mobile. That's just for mobile. It has 400 million active users. 200 million users log in every day.

Facebook | Statistics

Facebook said:

"When we come to evaluate doing business in any country, we do so thoughtfully and are mindful of the rules, regulations, and customs," the company said. "As Facebook grows, we'll absolutely be considering which groups we can actively participate in."

As Facebook grows to 1 billion will it then consider doing something about human rights?

PC World reports: Senator to Introduce Internet Human Rights Bill

Durbin noted that Facebook had asked for the State Department's help when it was blocked in Vietnam. "If Facebook expects our government to help resolving efforts to censor its service, it only seems reasonable that they accept some responsibility themselves for addressing human rights issues," Durbin said.

UPDATED: Senate Leader Blasts Tech Industry, Plans Net Freedom Law — Datamation.com

Last month, Durbin sent letters of inquiry to 30 top IT firms asking about their policies concerning Internet censorship overseas and asking executives to appear at today's hearing, where the witnesses were sworn in and testified under oath. But the companies, which included Facebook and Twitter, declined the subcommittee's invitation to appear, Durbin said. A McAfee (NYSE: MFE) executive had been scheduled to testify, but declined shortly before the hearing. The lone representative from the tech sector was Nicole Wong, Google's vice president and deputy general counsel.

There might also be legislation that blocks US companies from selling equipment abroad that enables governments to censor and monitor individuals. This could affect a huge amount of sales. There is a lot of software and hardware that could be used for such purposes.

Interesting times ahead for US Internet companies. They are very reluctant to commit to upholding human rights abroad for all their talk of Internet freedoms.

Usually, industries try to self-regulate because they don't want governments regulating them with laws that will drive up their cost of business, or even limit their business. But in this case, upholding human rights abroad, the Internet companies can't bring themselves to any mutual agreement.

Now, this makes sense: Why Did Twitter Hire A Tech Policy Specialist As Comms Chief? - SVW

Sometimes some people hate change and the most trivial changes can set them off in ways unimagined.

That's a lesson Richard Dawkins, author, scientist, and professional atheist, learned recently when he made some changes to his site RichardDawkins.net. Here is an extract from his letter to his forum members:

Dear forum members,

We wanted you all to know at the earliest opportunity about our new website currently in development. RichardDawkins.net will have a new look and feel, improved security, and much more. Visits to the site have really grown over the past 3 1/2 years, and this update gives us an opportunity to address several issues. Over the years we've become one of the world's leading resources for breaking rational and scientific news from all over the net and creating original content. We are focusing on quality content distribution, and will be bringing more original articles, video and other content as we grow...

The reaction from some of his forum members was spectacular. Overnight, he became the target of "personal vilification on an unprecedented scale."

The name calling was over the top, ranging from the relatively mild "utter twat" to a "suppurating rectum. A suppurating rat's rectum. A suppurating rat's rectum inside a dead skunk that's been shoved up a week-old dead rhino's twat."

And worse... "a sudden urge to ram a fistful of nails down your throat" and more...

Mr Dawkins wondered "what do you have to do to earn vitriol like that? Eat a baby? Gas a trainload of harmless and defenceless people? Rape an altar boy? Tip an old lady out of her wheel chair and kick her in the teeth before running off with her handbag?"

No, it was to write a letter explaining the changes to the forum on his website.

"Surely there has to be something wrong with people who can resort to such over-the-top language, over-reacting so spectacularly to something so trivial. Even some of those with more temperate language are responding to the proposed changes in a way that is little short of hysterical. ... Have we stumbled on some dark, territorial atavism?"

"...what this remarkable bile suggests to me is that there is something rotten in the Internet culture that can vent it."

There certainly is something rotten and good luck trying to root it out.

You can read the entire post here: RichardDawkins.net Forum • View topic - Outrage

(Hat tip Chris Dymond.

I've long said that creating Twitter clients is a lot of work for a very short market window because Twitter itself will eventually get into that business. And other Twitter related businesses too.

That's what seems to be happening. MG Siegler spotted this Tweet from a Twitter software engineer:

"If you had some of the nifty site features that we Twitter employees have, you might not want to use a desktop client. (You will soon.)"

Sure, Twitter client developers might be able to keep a step or two ahead of Twitter, they might be a little more nimble but eventually Twitter will catchup.

Some users of Twitter clients might not want the switching costs -- it might be difficult to transfer some of their favorite lists, or other things such as the look and feel of their favorite Twitter client. But that would be a fairly small group of users out of the total number of users in the future Twitterverse -- probably not enough to build a sustainable business.

Henry Blodgett sums it up well:

...it's the difference between Google Sites revenue (Google.com), in which Google keeps 100% of the money and Google Network revenue, in which Google has to hand over 50%-80% of the money to a distribution partner.

Foremski's Take: If I were Twitter I wouldn't rush into swallowing everything up too soon -- it's good to have third-party developers testing out markets and also evangelizing those markets -- then you can step in and suck those business ideas into your black hole. Unless, that is, that third-party developers get wise and decide not to do your dirty work for you.

A better tactic would be to buy some of those third-party developers instead of pushing them out of the way.

That will encourage other developers to be creative and to do the hard work for you, in the hopes that you might buy them.

I don't pay much attention to games. I used to play games as a kid, and I used to play Halo as an adult. But that was years ago.

Today there are games everywhere, Farmville on Facebook, games at fast food places, games based on watching TV shows. I've managed to avoid all those too.

But I'm probably in the minority. Because games have become one of the most lucrative commercial endeavors, which means lots of people are playing. And game culture is having an effect on our broader culture -- especially the game culture of earning points.

Kevin Kelly points to a fascinating talk by Jesse Schell, a games designer. In "Design outside the box" Mr Schell starts by explaining out how much money is made by very simple games, such as Farmville and Club Penguin.

But its the latter part of his talk that is even more interesting, when he predicts how games will be embedded into our reality. With the use of wireless sensors, a lot of real world game play is possible.

For example:

- people will be rewarded with points by their insurance companies for walking.

- kids will get points for doing well at their music lessons.

- people will use public transport to earn points that are redeemable through tax credits; and so on...

Kevin Kelly notes:

On second viewing I realized that Schell had also outlined a version of an attention economy -- where points are distributed for paying attention -- to ads, or other activities, or other people. Some aspect of his vision seems pretty inevitable.

Foremski's Take: I agree with Kevin Kelly and Jesse Schell that the intrusion of games into our society is inevitable. But It's a scary future.

I can imagine people doing all sorts of weird things because some advertiser pays them points, for say, shouting out their name at noon: "JACK IN THE BOX!" and monitors it via a cell phone, and its GPS location, for extra points in an urban area. And there will be even weirder, crazier stuff going on, as games becoming ever more embedded into our reality.

Foursquare already gives us a tiny glimpse of a world where games are embedded into reality -- its a form of what could be called a 'reverse virtual reality.'

And 'points' are a perfect example of a reverse virtual reality (RVR), they are a virtual currency with real benefits.

The opportunities for abuse, in constructing points based RVR game play, are huge. Yes, people will be encouraged into healthier behaviors but they will also be taken advantage of by their willingness to do things for points.

We won't need to fear subtle mind control by governments, or a Big Brother, people will do and say all manner of things, not because they love their Dear Leader, but because they earn points.

- Monitoring of behavior, and the scoring of points, will be carried out by cheap sensors networked together through the ever spreading wireless communications layer that will soon be ubiquitous, even in remote rural areas.

- Collation and redemption of points will be in online worlds where even more points can be earned, by taking part in immersive experiences that strengthen brand association and loyalty. Scary, very scary.

- And of course, the tax man will take his share. How, I'm not sure, but there will be a way. And since government will benefit, it benefits the government to regulate it and encourage it.

But what if you don't want to participate in the brave new RVR world?

Of course, you won't have to, there's nothing that says that you must, no laws can compel you, in fact, there will be laws that protect you from discrimination through having to have RVR points, in housing, employment, and education.

However, we are social animals, we are very social animals. Monkey see, monkey do. Peer pressure will compel us into RVR game play to an enormous degree. Decrees against RVR game play will find few takers.

And as the real world becomes ever more tied to the virtual world, outcasts from this RVR society, like outcasts have always done, will once again form communes in the woods and remote areas of the world. Will you be one of them?

I'd like to think I'll be one of them, but then I'd have to walk away from all those points I've accumulated over so many years...

Take a look at the video - it's really worth it.

DICE 2010: "Design Outside the Box" Presentation Videos - G4tv.com

Following an Italian court ruling earlier this week, Google is facing the prospect of having to check Italian sourced videos before they are posted, to make sure they don't violate Italian privacy laws.

That's a daunting task.

One potential way around this problem is to do what it did in South Korea last year. A new law forced Google to collect the real names of Koreans uploading videos or commenting online.

On the day the law came into effect, Google simply switched off the comments and blocked the ability for people to upload videos to its Korean YouTube site. Koreans were still allowed to upload video to YouTube sites in neighboring countries.

It was neat sidestep of its legal obligations.

Run for the border...

Courts only have jurisdiction within their country. But web sites and data, can be located anywhere. In the future, Iceland, might become a favored destination for Internet data because it is debating passing strong laws that protect freedom of speech.

Iceland plans future as global haven for freedom of speech | World news | guardian.co.uk

Google could use the international nature of the Internet to thumb its nose at any government seeking to control what it hosts.

Such a strategy however, is a risky one. If it chooses the wrong issue, it would be seen as an international pariah, which would harm its brand. After all, a competitor is always just one click away.

Google needs to decide whether its claim to "Internet freedom," as its right to host and distribute a video of a disabled boy being beaten and insulted, is one that would justify disregarding a country's laws.

There might be more important battles to be waged in the future and it would do well to keep its powder dry.

- - -
Please see:

Analysis: Italian Decision Could Help Traditional Media Orgs

Google Is A Media Company - New York Times Sees The Connection In Italian Court Case