Silicon Valley Watcher - at the intersection of technology and media

I'm still trying to figure out the best way to use Google Buzz. But, already, I've had to 'unfollow' people such as Robert Scoble and Louis Gray because they are way too 'noisy' they crowd out everyone else in my stream.

I have had others unfollow me too because my Twitter stream was feeding directly into Google Buzz and taking up most of their stream.

Louis Gray often says that information overload is a failure of your filters. That's true. I just don't know how to set the filters on Google Buzz beyond 'unfollow' and I expect others don't know too.

It would be great if there was a dial, where you could 'dial down' some people, and raise up others. That's a simple interface control that everyone knows how to use.

Twitter, and to some extent Facebook, are good tools to promote blog posts, videos, micro-posts, etc, because there is less danger of dominating a followers' stream. That's because unlike Google Buzz, those streams are organized in ways to tend to limit such potential for annoyance.

I'm sure that Google Buzz will evolve to be more like those streams.

In the meantime, I would love if Google Buzz didn't keep telling me the number of new 'buzzes' in my stream. I'm less likely to check them when there is a large number of them. As it is, I don't like going to Gmail much anyway, because of my 67,265 unread emails.

Gmail feels like "Guilt mail" because I haven't replied to so many messages. GBuzz is far less guilt ridden, but it does feel like a lot of extra work, a lot more extra interactions that need to be done, when I'd rather be interacting offline.

Today's Google Buzz introduction was impressive in that it attempts to link together so many Internet services, and there will be more added in the near future.

Friendfeed (now owned by Facebook) attempted to do the same but Friendfeed suffered from a perception that it was mainly for the geek elite. Will Google Buzz face a similar fate? It's too early to say.

What is clear is that Google Buzz can be viewed as just one version of the 'one ring to link them all' model that many other businesses are trying to attain. If you can own that ring, you rule them all.

You can see that strategy at Facebook, Twitter, and at other companies in their fields, such as Salesforce.com in enterprise apps.

Owning instead of linking...

Google says that its future plans include integrating Buzz into its other services, and that they will observe how people are using it. And this is where Google has an advantage in that it owns many web services such as email, photo sharing, document sharing, voice calls, text messaging, maps, news readers, etc.

Facebook is also trying to become the 'one ring to link them all.' And like Google, it has its own services; it is about to launch a new souped up email system; it integrates Twitter updates; it has become one of the largest photo and video sharing sites; it has event services, and more services are on their way.

Microsoft Live has a similar strategy and similar services. And other companies are moving in the same direction, for example Nokia, with its OVI push around mobile maps, and other online services.

It will be important to own your own Internet services because third party services will undoubtably start to limit how much of their user data they are willing to share with other businesses. Such data is made available through open APIs (application programming interfaces). Open APIs are essential for social networking and sharing across many different Internet sites.

Increased competition will very likely be reflected in constraints on open APIs. Why make it easier for another business to roll up your user data? Each business will try to make life difficult for its competitors, and for future ones.

From open APIs to ajar...

APIs will become 'ajar' in that they will be partially open. Limited APIs are hated by the geek community but they make perfect sense for businesses trying to stop competitors from profiting from their user communities.

Limited APIs will make it very difficult for Google, or any other company, to create a 'one ring to link them all' model. We are much more likely to have a series of separate 'rings,' each one representing a fairly closed, self-contained world, where common Internet services are aggregated.

Unfortunately, this all points to a future Internet that is increasingly closed and proprietary.

- - -

Introducing Google Buzz

Microsoft Slams Google Buzz

Yahoo: We've Had Our Own Google Buzz For Over A Year (YHOO, GOOG)

How Google Buzz Validates but Marginalizes FriendFeed

Google's poor social score

I never believed in online shopping price comparison services. Because I never believed that retailers would allow their sites to be scraped and their prices easily compared.

Why would they do that? What advantage is there in allowing third-party services to undermine their business?

I have rarely been able to find a straightforward price comparison that was able to factor in everything, such as shipping, taxes, and extras.

The East coast camera retailers, for example, would advertise low prices online but then charge you extra for flash memory, shipping, warranties, and 'camera kits,' that quickly negated any savings.

And it makes sense that retailers would try to make it as difficult as possible to get a clean price quote because otherwise they are at the mercy of the lowest price competitor. They would also be at the mercy of their stupidest competitor -- the one that charges an unrealistic price, too low to maintain profitability or viability.

Today's New York Times has a report by Brad Stone on yet another aspect of online pricing - manufacturers seeking to control what price retailers can advertise on their products.

The Fight over Prices on the Internet - NYTimes.com

On some pages of e-commerce sites selling products like televisions, digital cameras and jewelry, a critical piece of information is conspicuously missing: the price tag.

Customers have to go to the online checkout to see the price. These missing prices are more likely to be methods of thwarting price comparison engines rather than manufacturers' price controls.

Retailers have long managed to get around pricing controls by giving other things away. For example, Apple dealers aren't allowed to under cut each other on price but they can give away printers and other products, which effectively undercuts Apple's recommended retail prices.

What is much more interesting is this tidbit, buried deeper in the NYTimes article, almost at the very end:

Instead of selling e-books wholesale to retailers like Amazon.com, the publishers want to sell them directly, setting prices and having the retailer act as an agent, taking a fixed 30 percent commission.

Wow. Turning Amazon into an affiliate! How ironic, since Amazon is one of the largest affiliate marketers, offering a percentage of revenues sold by third parties.

This is the danger that online retailers now face: what if their suppliers want to sell direct?

A search engine, such as Google or Bing, would be able to make it very easy to find the online stores of the manufacturers of many goods. This would be like a huge outlet store in the cloud.

In most cases manufacturers are already drop-shipping orders on goods collected by online retailers. Why not cut out the middle man?

In addition, the manufacturers would be collecting important customer data -- data that is currently kept by the retailer. They would be able to develop a direct customer relationship for the very first time (beyond the voluntary 'warranty' cards found with many products).

And if you know who bought what and when, it becomes easy to work out who will probably be needing a new washing machine, or computer, because the old one is on its last legs. Your marketing goes direct -- which cuts out a lot of costs.

Fortunately for the retailers, manufacturers don't know how to market well, or how to manage a direct customer relationship. At least, not yet...

Amazon has some protection from this trend in that it has layered on a lot of cool features and services, such as customer reviews, and secure online payment systems. That will help in retaining customers and making it less attractive for its suppliers to sell direct.

But it's clear that there are troubling signs ahead, that the Internet does make it possible for manufacturers to sell direct; and that search engines could create the storefront; they could aggregate customer reviews; and offer secure payment services (Google Checkout).

Online retailers are caught between a rock (search engines) and a hard place (suppliers selling direct). Both have sound business reasons to squeeze out the middle guy.

This is less true for retailers that also have physical locations such as Wal-mart or Best Buy. Will Amazon make a bricks and mortar acquisition?

Stories about Apple's iPad dominated my Twitter stream and Facebook for many days but the rest of the world cared more about Haiti.

Take a look at this graph from Clearspring's AddThis, which shows the stories that people have been sharing:

It seems President Obama has lost a lot of public interest... he should have gotten up on stage with Steve Jobs.

A massive dislocation in the crust of the media landscape caused by self-publishing media technologies will raise a media Tsunami that will wash away at the value of all media.

The media is dead, long live the media. We now have more media, in more formats, in more times of the day and night, from more people -- than at any other time in history. And we will get even more in 2010.

The many different forms of media will continue to flourish and splinter and to compete with each other in 2010, only at a far greater scale.

This is all made possible because of the availability of very powerful and inexpensive self-publishing tools and services:

- Blogging software helped make self-publishing easy. Movable Type was a breakthrough product in the early 2000s, the 'Pagemaker' of its day. But you had to know how to install it and configure it. These days, there are multitudes of hosted publishing platforms that make everything simple. Posterous, for example, allows you to blog by simply sending an email to your account.

- Twitter makes self-publishing even easier, using the simple text message format to send a short post.

- Facebook and other social networks are set up to make self-publishing tremendously simple. Facebook, for example, automatically creates a news feed based on what you did: Tom uploaded some photos, Tom is going to Jill's party... all without having to actually write anything.

- Same for video, music, podcasts...

The single most important technology of the past decade has been the development of self-publishing tools and services.

And very importantly: we have now traversed the cultural change that questioned whether we needed these tools, whether blogging or Twitter or Facebook or YouTube really mattered, or have a future. We've moved on.

We're now entering the full-blown creation and publishing phase. It's not just a relatively small group of early adopters that used and evangelized these tools and services, it has now moved mainstream. It is now involving millions, tens of millions, and soon hundreds of millions of people.

We have all the elements in place for a media Tsunami. A giant wave of media of all types will wash over us.

And it won't be all dross — there will be a huge amount of great media, great blog posts, great Tweets, great videos, great discussions, great music.

What will this mean?

This Tsunami will wash away at the value of all media. By value I mean the monetary value.

-If you are trying to make a living as a media professional it's going to be even tougher this year. You will need something else to sell aswell.

- The advertising model will continue lose value simply because there is more competition for attention and it is tougher to aggregate large numbers of readers or viewers. This will affect established media brands and also new brands entering the market.

- All the ills affecting the media industry in TV, radio, newspapers, book publishing, etc, will continue, and will accelerate in 2010.

- PR and marketing will be even tougher in 2010. It will cost more for a company to rise above the noise. But few companies will realize that they need to spend more on PR and marketing because they think that you can use 'social media,' which is free. When in fact it's all media and it's not free because people's labor isn't free.

- It will become tougher to have good government, to make good decisions as a society, to vote for the right solutions because it will be difficult to communicate amidst all the noise and clamor for attention.

The media Tsunami will come in waves but it will eventually break. And much of the freely generated media will eventually come under commercial control.

The media brands that survive the Tsunami will do very well. From a highly fragmented media landscape will emerge some very large and very profitable media businesses -- unencumbered by the restrictions that currently govern media conglomerates.

However, we face a tough time, a disruptive period, a wild west of sorts. A very interesting time. Paradoxically, media is the worst business to be in right now but media is the best story around.

Welcome to 2010 and a decade that will be defined by its media and will redefine media — time and again.

- - -

In an effort to make a living as a media professional in 2010 I realize that I will need to expand into consulting services to support my 'habit.' You can contact me at 415 336 7547. Or Tom at Foremski.com.

Occasionally, I will Google myself just to see what content others are linking to and what they are saying. But lately I've noticed that my citations in Google are shrinking. I'm producing ever more content, but Google is finding fewer references.

Let me give you a point of comparison. On March 3 2009 I wrote: Internet Myth: Watch What You Post Because Search Will Reveal Everything Forever.

At that time I Googled "Tom Foremski" and it came up with a search result of 135,000 pages in Google's index.

Today, I did the same, and came up with 102,000 pages in Google's index.

I tried Bing and got 157,000 results.

What's going on? Has Google run out of room? Is it deleting older content from its index? It's grown smaller by almost 25 per cent, at least when it comes to my content. At this rate, by the end of this year it's index will be half the size it was in March.

Is it just me? I've no other points of comparison. Let me know if you've noticed something similar.

The questions I struggle with the most these days are these: Where should I publish and how much should I publish?

Should I spend more time in the real-time world of Twitter and Friendfeed?

Should I spend more time on SVW or on my blog on ZDNet: IMHO?

How much time should I spend in Facebook and is it OK to republish my blog posts there?

How much should I publish? How much is too much? If I publish too much will that be "noise" and will people unsubscribe?

How much time should I spend leaving comments on other sites?

How much time should I spend writing email and replying to email?

How much time should I spend sending and replying to SMS? How much on Twitter?

I'm not sure what the answers to these questions are. But I know we are all asking these types of questions because our media and comms channels are fragmenting at a rapid rate and we have to shift resources around to deal with all of them.

We all have a time-pie and we each have to figure out how large each slice for each activity should be. That includes family and self-time.

One thing is certain, you need to have a slice for each media communications channel it's not a good idea to abandon any one of them.

How many more slices will we need to make in the future? Quite a few I think. Which slices get shaved? They all do.

As people abandon blogs for the visceral thrill and trill of Twitter there is something that many might not have considered about the real-time web.

There is no Google juice.

By Google juice I mean the ranking that Google gives content. Google assesses the importance of content by the number of links to a site, how long that site has been around, and dozens of other factors.

Put them all together and that's how Google puts together its search results.

Everyone wants to be "above the fold" on that first screen of Google results. But Twitter or any other real-time platform such as Facebook status updates, or Friendfeed, won't get you there.

And with the real-time web, without a ranking system, you get lost in the noise, and the noise gets louder and louder with each day as more people (and marketeers) swarm onto the real-time web.

Why do you think that Robert Scoble said he was toning down his real-time web activities and returning to blogging, a few weeks back? Scobleizer Traffic Plunge - The Real-Time Web Can Be Bad For Your Blog

You've got to do both. If you abandon your static web presence for your real-time activities you will find it harder to build your overall social media capital, imho.

[BTW, the Google juice factor is how Google can easily control competition from the likes of Twitter, Facebook, etc. Those services don't have a good ranking system, at least not yet.]

Doing both raises the amount of time you have to spend on publishing. But that's just the way things are.

If you look at the stars of the social media scene: in blogging, Twitter, Friendfeed, Facebook, etc, you'll notice that apart from the celebrities, they are all very social -- you could call them hyper-social. Take for instance Robert Scoble, now with Building 43.

If you want to be successful as Robert Scoble in social media -- here is what it takes:

I asked Robert how much time he actually spends on those services. He monitors them all day, he said, hitting refresh over and over on both (he doesn't use desktop clients to manage the services, and he says he doesn't like real-time streaming feature on Friendfeed). In addition to watching all day, he says he spends at least seven hours a day, seven days a week, actually reading and responding directly on those services.

That's 2,555 hours over the last year.

Which is more than a full time job (2,000 hours/year).

It is more than 106 full 24 hour days interacting with those services in aggregate.

. . . What has he gained? On Twitter Robert has nearly 45,000 followers and has written over 16,000 messages. On Friendfeed Robert has nearly 23,000 subscribers.

Other social media stars put in the same kind of hours.

(Interestingly, some of them have young families. Maybe it gets them out of diaper duties :-)

But what happens if you are shy? What happens if you don't want to flood your Twitter, blog , Friendfeed, and Facebook streams with a bit-torrent of messages and posts? I prefer to post less rather than more, but that hasn't done me much good when it comes to expanding my traffic at the same rate as others.

I will cut people off if they are too loud in my streams because they push other people out. But maybe that's the best strategy for online success -- the cuckoo strategy -- become so prolific that you push the others out of people's real-time streams.

What do you think? Do you prefer less, or more?

As the Twitterati, (and FriendFeederati,) abandon blogging and past-tense sites, is this a sign of the next phase of online media? It seems that way.

So what will happen to online advertising, and the "old" media? There's no real-time ad networks right now and none on the real-time media that I see.

The old media (we used to call it mainstream) has barely gotten used to the "Always-On-Media" of blogging, etc. Now they have to jump into the real-time web.

And they can't.

Because there isn't a business model in the real-time web. (Just as there isn't in online media.)

By the time they jump in, there might be a business model then. Maybe. But I bet it won't be enough to support professional work.

The current fashion and passion among the digerati, or rather Twiterati is for the real-time web, real-time search, and the real-time flow of our Internet experience.

For example, just a few minutes ago I noticed that blogger Louis Gray complained that Robert Scoble's recent post took more than two hours to reach his Google Reader.

I can understand the need for real-time information for stock trading but I don't know why I would need near real-time access to Robert's posts. Yet we constantly hear from many people these days about the need for real-time communications and Internet services, corporations need to monitor the web in real-time, etc.

What's happened to all the chatter we used to have about everything ever created on the Internet is available for ever? (The Eternal Internet.) Or, that the Internet operates on your time, when you want it. (The Tivo Internet.)

I'm not sure either exists completely. If things take just a few too many clicks to find, they might as well not exist.

For example, yesterday I was trying to find some of the writings of "Wendy Kroy" at Sand Hill Slave, a hilarious bitch-goddess account of working with VCs. She stopped publishing a couple of years ago yet I was having a lot of trouble finding some of her posts. Even the Way Back Machine was giving me lots of dead-ends. (I did finally find this: VC stands for very clueless.)

Even the Tivo Internet is not really there. When I try to find something I already watched on Hulu, the program is often withdrawn.

Now, with our seemingly collective passion for all-things-real-time, if you blink you've missed it. For example, I often post or Twit late at night and my Twitter and Facebook feeds get seen by people who are either waking up somewhere, or are late night owls like myself.

The same is true for myself. I can only dip into the real-time streams of my Twitter and Facebook communities a few times for a few minutes a day. If I didn't see your post then, then I most probably missed it. Yes, I could review my rivers of content but I'm unlikely to do that, and that's true for most people.

Paradoxically, I think that there is less reason for corporations to keep track of how people are talking about their brands because of the temporal nature of things. If conversations happen in real-time then they are done and dusted, fewer people are likely to notice, and therefore there isn't much that a corporation can do.

This temporal nature of content has been with us for a long time. Newspapers quickly became yesterday's fish-wrap. And blogging exacerbated things because new content would push older content steadily down the page and then into the oblivion of the archives. Yes, you can search but only if you know something is there.

So does that mean it is OK to re-post, maybe several times a day, because the likelihood of people seeing the same thing twice is small? I think that's fine. I sometimes republish SVW posts written many years ago and they find new audiences because the content is fresh to them.

I have an idea for a site that republishes great content, dredged up from the past. For example, that viral video from five years ago would certainly look fresh to many people today. New is new when it's new to me, real-time or not.

So what's beyond real-time? That's next.

. . .

Please see:

Carl Honore praises slowness | Video on TED.com

"Journalist Carl Honore believes the Western world's emphasis on speed erodes health, productivity and quality of life."

Today's Real-Time Web Makes Blogging and RSS Seem "Too Slow" - louisgray.com

Modern maladies: I have the attention span of a gnat | Tom Foremski: IMHO | ZDNet.com

VC stands for very clueless

An ode to Slave Girl. . . - SiliconValleyWatcher

It's interesting that my closest friends and family tend not to follow me on Twitter, Facebook or read SVW. They do occasionally, but it's rare.

I don't mind that my friends and family don't really know what I get up to online. But I do know some people that are upset that their friends don't have the same interest in their online worlds as do strangers thousands of miles away.

I asked on Twitter: Do you find that your closest friends tend not to follow you on Twitter or Facebook or your blog?

Here are some of the replies:

@peter that's absolutely true for me. Of course, most of them are not online all the time like I am. :-)

@meredithob - yes, i interact w/ my closest friends on a more personal level. communication is exchange-driven, they don't "follow" me.

@mindblink yes, it's mostly totally random strangers like me.... :)

@tiffanyanderson Some of my closest friends don't even know what twitter is. (^;

@JohnRourke ...So true

@chrissfife I tweet and blog mostly about marketing, many of my pals couldn't care less about marketing so they don't follow or read blog

@ginavon yes- I would agree w/that.

@james3neal - My best friend and my sister know that I love Twitter but neither one reads my Twitter feed. Sometimes my Mom does. :-)

@emiliecole I'd say more so on Twitter, as it seems to be most used for professional interests, convos and connections...

@SMCreative Yes, but they read it and make comments. Oddly enough I believe they're reluctant to have to redefine you in their heads.

Maybe it's the company I keep online, mostly media, PR, marketing specialists. We're interested in these media as extensions of what we do rather than using them for what they were created for: allowing friends and family to stay in touch more easily.

More than three years ago I published some rules for today's workforce and I'm updating them so that people can be somewhat protected from the unpleasant effects of losing a job.

Since most people are expected to go through more than a dozen jobs, and even several career changes, throughout their life, I think the following rules are more than necessary:

- Use your own cell phone/number for business.

Don't use a company provided cell phone because if you lose your job you lose your number, and you lose your business contacts. Your employer can pay your cell phone expenses.

- Use your own email address for business.

Again, you want to be able to be reachable by your business contacts and vice versa, if you lose your job.

- Carry your own health insurance.

It's a lot less expensive than Cobra, and it means you aren't stuck in a job that makes you sick because of the health insurance. Again, some employers will give you a credit towards your health insurance costs or you can negotiate for a benefit when accepting a job. Employers might even choose someone with their own insurance over someone else, since healthcare is such a huge burden for a lot of businesses.

I got some additional tips from fellow bloggers. Mitch Ratcliffe wrote:

- Incorporate and work on contract rather than as an employee.

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

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

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

From Neville Hobson at NevOn:

- Create a blog and establish your personal presence in the new marketplace

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

- Join a business network like LinkedIn or OpenBC

However you actively use these or not, they can help establish your individual credibility and provide avenues of contact with others for mutual benefit.

Today I would add:

- Join Facebook

Facebook has become as important as LinkedIn in certain ways. It is a good way to establish your online identity - both professional and personal. It makes it easy to stay in touch with people and contacts even if jobs and addresses change.

- Join Twitter

Twitter is another good way to establish a personal and professional presence. And it rewards those that share good information and insights. Plus, sometimes people post about job openings before they are advertised elsewhere.

Rule number ten is ...

What do you think it should be?

In the "Web 2.0" scene there has been much spoken about the "wisdom of crowds." It is rare to see anyone challenge this accepted notion.

Communities are encouraged to express themselves and when they do, you tend to get a uniformity of thinking.

I was always brought up to question the wisdom of crowds, to question the accepted beliefs of the majority. I tend to stay away from "crowd" thinking. As a younger man I was always pleased that there was a "Doubting Thomas" that I could draw inspiration from.

If anything, there are many examples of the "madness of crowds." Pogroms, Adolf Hitler coming to power, wars, are easy ones to spot where there has been a huge lack of wisdom from the crowds.

I wonder if the recent financial speculative bubbles will do much to erode the accepted notion of the "wisdom of crowds."

DK Matai, chairman of the ATCA Open writes an interesting essay on how this financial crisis will play out in the following article titled: The Four Scenarios: Debt Deflation, Hyperinflation, Quadrillion Play and Muddle Through.

The "Four Scenarios" brings to mind the "Four Horsemen" as a metaphor for describing these extraordinary times.

It's an interesting essay. I love the imagery of scenario #3 and that is my pick because governments think they have control but they do not and thus will continually put markets out of balance. And the road to hell is paved with good intentions.

IMHO, the thing to do is to let it all play itself out, since no one can understand the complexity of today's global markets.

[BTW, the third horseman rides a black horse and represents famine and carries a scale. Scarcity and judgement?!]

The Four Scenarios: Debt Deflation, Hyperinflation, Quadrillion Play and Muddle Through.

By DK Matai

From the vantage point of November 15th, 2008, whilst the Washington, DC, summit is underway amongst the leaders of the G20 nations, it would appear that there are four distinct global economic scenarios that may unfold towards the tail end of this year, 2009 and 2010:

Scenario 1: Debt Deflation

Most product, service and asset prices keep falling and the vicious circle of deleveraging causes many businesses, factories and support sectors to shut down. This in turn causes rising and out of control unemployment and falling living standards quarter-in, quarter-out with a severe and ongoing headache for some governments to provide stimulus in the face of declining revenues. This is a similar scenario to the US in the 1930s post the 1929 Wall Street crash.

Scenario 2: Hyperinflation

Some governments print money to try to stave off a recession / depression and end up stoking large scale inflation in a similar way to the Weimar Republic in Germany around 1923 post the first world war's conclusion in 1919. Hyperinflation is the flip side of currency collapse, which then leads to multiple domestic and trans-national black swans.

Scenario 3: Quadrillion Play

The invisible one Quadrillion dollar derivatives equation underpinning the hundred trillion dollar plus debt pyramid manifest as "Eight Bubbles" (Ref: ATCA briefings) continues to experience trillion dollar black holes in which capital on the balance sheet vaporises without warning, month-in month-out. Governments via central banks try to hyper inflate and levitate the system by pumping trillions of dollars of liquidity into the system. The net impact is manifest via two opposite north and south directional vectors -- hyperinflation and deflation. The two vectors collide continuously to create several vortices as the markets change direction nearly every day exhibiting high volatility. The consequence of being caught up in the resultant eddy currents of those vortices is that some asset classes levitate and give the impression of rising, albeit temporarily, and other asset classes fall or simply cease to exist as their underlying asset-base vaporises within the gravitational pull of the nascent financial black holes.

Scenario 4: Muddle Through

Given that fiscal stimulus is one component of GDP over which there is direct policy control, the muddle through is another possible scenario. However, government spending is always far too slow and occurs at some point in the future so we can expect a lunge towards cutting taxes or offering tax holidays, which is the high velocity component. The massive public sector borrowing requirement may have an adverse impact by way of currency devaluation. There is some probability that the governments' massive stimulus packages and central banks' interventions, after a while of uncertainty in the minds of people, act as a partial, deferred offset to the ongoing global financial system deleverage. Then markets may revive, although some of the eight bubbles are only partially deflated. Life goes on in a new muddled way as new and larger bubbles are created. Politicians stop panicking and get re-elected and a new bigger set of bubbles prepare themselves for collapse a few years later, say, 2015 or 2020. This is similar to the scenario post the dotcom and 9/11 crashes in 2000-2001 and the muddle through which occurred until 2007 on the back of extremely low interest rates, credit card, car and housing loans and the other eight bubbles. There is, however, one caveat. Countries without reserve currencies -- of which there are really only two -- and in particular those with with large financial sectors given the base of their GDP, can practically prime the pump only in a very limited way and in doing so risk moving from a banking crisis via a currency crisis on to sovereign default. That would mean expectations from fiscal stimulus are far too high, and not all countries would be able to muddle through.

Conclusions

Irving Wladawsky-Berger is one of IBM's top strategists. The following is an edited extract from a longer article: Indifference, Hostility, Isolation and Other Obstacles to a Healthy Innovation Environment.

Mr Wladawsky-Berger draws upon a long career within IBM and also from his experiences working with thousands of companies around the world.

By Irving Wladawsky-Berger

In most companies, just about all the cards are stacked against the nurturing of innovation, especially the kinds of new ideas and disruptive innovations that generally lead to major changes in the marketplace and within the business.

Is that too pessimistic a view? Perhaps. Let me discuss some of the behaviors I have observed through the years in various companies, which have convinced me how difficult it is to create the proper environment for innovation to flourish.

Indifference. While just about every CEOs and senior executive of a company will pay lip service to innovation, many do not really mean it. It is not because they are not good, smart and highly competent people. It is just not part of their DNA. Of course, they mouth the words – it would be politically incorrect for them not to embrace innovation. But they do little beyond that.

Why is that? The majority of executives make it to top positions by being very good operational managers: meeting sales objectives, improving products and services to keep up with competitors, supporting existing customers and acquiring new ones, managing mergers and acquisitions, achieving the required financial results quarter after quarter, and so on. These management jobs are very tough and getting tougher, given our rapidly changing, fiercely competitive, global business environment. Being a good manager takes very hard work, attention to detail and organizational discipline. . .

. . . Hostility. In general, managers who do not actively encourage new ideas and innovations in their organizations do so because of indifference. It is just not who they are. They will typically listen politely to your new idea, provide some encouragement and offer good advice. If they are being honest, they will tell you that they barely have the time, energy and budget to help much beyond a pat on the back now and then.

But some managers - fortunately, a relatively small number, in my experience - go beyond indifference. Their initial reaction to any new idea is negative, if not downright hostile. This is particularly true if the idea comes from someone outside their own organization. They tend to be poor team players and autocratic.

Some of them also exhibit characteristics that many of us would associate with being a bully. The Merriam-Webster online dictionary defines bully as "a blustering, browbeating person; especially one habitually cruel to others who are weaker." Wikipedia's entry says, "Research indicates that adults who bully have personalities that are authoritarian, combined with a strong need to control or dominate. It has also been suggested that a deficit in social skills and a prejudicial view of subordinates can be particular risk factors.”

These words pretty much fit the behavior of the corporate bullies I have met. Typically, they have achieved their high management positions because, despite their poor interpersonal skills, they are very good at other parts of the job. Sometimes, they are excellent innovators themselves, but given their autocratic tendencies, innovation to them is a one man/woman show. Collaborative innovation is not for them.

I would further add that another reason people with such behaviors are tolerated by upper management is that they generally are very respectful of hierarchy and authority and treat those above them very differently, reserving their worst behaviors for colleagues and subordinates.

Such hostile behavior is particularly detrimental to a healthy innovation environment. People championing new ideas, especially if they are potentially disruptive new ideas, are doing so by going against the grain of what the business is currently doing. Rejection is painful, especially coming from people in positions of authority. Senior managers can nurture those new ideas through positive words and actions, or they can stop them on their tracks by being overly negative and combative. . .

. . .Fostering innovation is very hard, especially if the innovation is disruptive in nature. A spirit of innovation and collaboration does not come naturally to an organization. For such a spirit to take hold, it must become an integral part of the company's culture. None of this is easy, but it is what a company must do if it truly wants to create a healthy environment for innovation to flourish.

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You can read the entire article on Irving Waldawsky-Berger's blog: Indifference, Hostility, Isolation and Other Obstacles to a Healthy Innovation Environment.

Chief Marketing Officer or VP of Marketing/Communications has to be one of the toughest jobs around these days. Why? Because of the massive fragmentation going on in media and communications.

We see the fragmentation in media in terms of the larger number of smaller media channels. It used to be relatively easy to run advertising in the publications that mattered. And easy to target those same publications for public relations.

These days large media companies are downsizing and the number of smaller media companies, most consisting of blogger journalists with uncertain reach and influence, are still being formed.

In the communications arena there are many new channels. Companies are trying to market through Facebook, Twitter, Friendfeed, MySpace, Digg, and several dozen more "social media" sites. Also, there is blogging by company representatives, video on YouTube, etc. And it is all still going on, continuing to get even more fragmented.

Then there are the many new conferences plus all the existing conferences and trade shows to deal with.

Marketing through strategic alliances with the right partners was also much easier. Now there are many choices, and a lot more potential competitors, which complicates things.

Good news . . .

The good news about the new media and communications channels is that it is all measurable. You can measure things in incredible detail. You slice and dice the measurement data in ways that were never possible before.

The bad news about the new media and communications channels is that it is all measurable. There is a mountain of data that can sliced and diced in so many ways. What is worth measuring? How much should you measure? What do the measurements mean? How can you relate the measurement data to revenues?

We are still figuring out these and many other questions. And that's why marketing and communications today is so challenging and it isn't going to get any easier.

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A strange thing often happens when I write. I sit down thinking about the structure of a news story or a news analysis and I often come up with different ideas and thoughts. I often find that I "think" through my fingers as I type.

This evening my fingers have been writing about OpenID and VeriSign:

- Could there be a Potential Privacy Issue with VeriSign's OpenID and its Internet Directory Name Services?

Could some uses of OpenID create a large privacy issue? | Tom Foremski: IMHO | ZDNet.com

As I've written these pieces I've started to question some of the basic ideas and concepts that surround OpenID and DNS.

It increasingly seems to me that OpenIDs benefit social network companies that don't have many users. While OpenID users could become vulnerable to the risk of easy tracking or monitoring: of not only their identity, but also the identity of their friends, family, work colleagues, contacts --and much of their online communication.

That's a much bigger exposure than revealing an individual's identity on the Internet.

Right now, the major social networks keep their user's social network information--and their user's identities--under lock and key. Ross Mayfield from SocialText likes to call their API strategy "AJAR" only slightly open--and for good reasons.

It seems to me that the widespread use of OpenID potentially exposes an individual's entire social network across the entire Internet. Right now that data is fragmented and difficult to acquire by anyone interested in nefarious uses .

Wouldn't it be better to keep that data fragmented and deal with the hassles of portability? Porting a few dozen contacts?

For most folk that's not an onerous task. If you use OpenID it effectively centralizes that data because it has to run through the central DNS service and through other databases and that potentially makes it easier to track.

The community wants it . . .

I've often heard OpenID touted as a "community ID" and that the "community wants it." I don't remember being consulted on this. I remember some bloggers loudly touting that they want something like OpenID for data portability.

But for those leading bloggers this is an easy method to bring their readers to new social network sites and to publish as widely as possible. Most people don't have 5,000 Facebook friends as do the top bloggers/publishers/ media companies. They represent an extreme example of social network usage that is far from typical of the mainstream user.

OpenID seems to benefit publishers not individuals. . .

It benefits the top bloggers/publishers to be able to port what are essentially reader connections wherever they want but does OpenID benefit an average user with networks that are counted in dozens rather than thousands?

OpenID is not much of solution in typical social network usage when the numbers are small. Where was the hue and cry about data portability from the average social network users? I don't remember seeing that. All I remember is the din from a dozen or so publishers.

Yes, you can find companies have come out in support of OpenID but most of them seem self-serving in their support because they don't have much of a social network to begin with and they would like to have one.

Maybe 3 social networks . . .

I can't handle more than 3 social networks -- that's my theory and I think it might apply more broadly :-)

When I leave my apartment I remember my keys, wallet, and phone but a fourth item is usually less reliably remembered.

Currently I'm cool with one main social network, which is Facebook; LinkedIn as a secondary/business network; and then my GMail/Twitter/SMS network - my social/communications (socco) network contacts.

That takes care of most of my business/personal/social needs. For some people, a third network might be a church group or hobby group. Or maybe other people can manage four networks or more, that's great.

The point is that for the vast majority of people, they are not going to be active in more than half a dozen relatively small social networks--so what is the purpose of OpenID?

Let me ask again: Are individuals going to benefit? Or is OpenID an opportunity for mass media publishers and businesses trying to create a business?

I don't have much of need for OpenID right now. What about you?

Wish everyone well . . . the market will take care of dumb competitors

The economics of the online media business are terrible. Decent journalism can't be supported on a pageview model. At least not yet.

There are some rapidly growing publishers in the tech space such as Michael Arrington's TechCrunch, GigaOm, and VentureBeat. They all make heavy use of an advertising network, in this case Federated Media Publishing (FM), founded by John Battelle, the search guru. And there are other online publishers that have become high flyers in fashion, food and woman's sites that also use FM.

FM takes about a 40 per cent cut of advertising revenues, but each deal with its some 200 publishers is private, so its share could be higher. It's a nice margin and well deserved compared with other networks because FM goes out and bangs on doors and sells ads.

But at some point soon, FM's largest publishers are going to be large enough that they won't need FM any longer. They'll do it themselves or sell to a higher bidder. For example FM lost Digg last year to Microsoft.

I was interested to see that FM Publishing recently raised funding that was reported to be as much as $50m.

That sounds like a war chest to me.

If I was Mr Battelle I would start buying up my online publishing partners. FM can monetize its publishers better than they can. FM knows exactly how much traffic, and the quality of the traffic hitting its publishers, it knows their business very well.

By acquiring their publishing partners they get an immediate boost in advertising revenues, they get to keep 100 per cent--nothing needs to be shared. And J.B. is a former publisher he understands how to run a media company.

The math is compelling. Ad networks will start buying up online publishers because: they'll make more money, they won't get dumped, and they can monetise online content far better than the online publishers currently can.

Of course it could go the other way (except where is the publisher's war chest...?) There is more here about the potential publisher strategy.

- - -

Please see: Arrington's Roll-Up The Blogs Strategy Won't Work

Please see Sramana Mitra's excellent recent analysis: Federated Media Needs to Focus

In 2007, FM raked in a revenue of $22 million, out of which $14 million went to the publishers. That indicates a gross margin of 36%. After deducting the operating expenses, what remains is a thin operating margin, not one that should bring forth a very large multiple.

On the positive side, some of the blogs that FM represents are earning over $50,000 per month, although Mike Arrington (Techcrunch) keeps complaining that they don’t sell enough of his inventory.

Recession, what recession? That's what it feels like in and around Silicon Valley. There is a lot of VC money being poured into startups so it feels as if we are recession proof, recession is what happens on the TV, somewhere else and not here.

That's what it might feel like but that's not what is potentially lurking below the surface. In conversations with local entreprenuers I'm hearing more stories about funding problems because of the recession, the real estate market slump, and the investment banking crisis.

In one story, a startup that had $7m in funding promised by large angels (arch-angels) lost much of it because the investors had lost money in real estate. Also, some angel investors have lost money because of Bear Stearns and now have less to to fund startups.

Angels gone?

The loss of the angel investors is potentially a big problem because Silicon Valley VC firms have outsourced much of the seed investing to the angels. The angel investors are a more important generator of the next wave of startups now than ever before, this could hurt Silicon Valley. [Please see: Jeff Clavier.]

I was at Lunch 2.0 at Ogilvy PR on Tuesday and I ran into James Hong, one of the founders of Hot or Not, a tremendously succesful web site. Hot or Not was sold in February to private equity firm Avid Life Media, for a reported $20m. He said fears of the recession were the prime reason Hot or Not was sold. "I'm telling all my friends to either get out now or buckle up for the long term."

"I'm not going to plan my next venture until it is clear what is going on with the economy," he said. I pointed out that Silicon Valley always produces its best ventures in a recession, Hot or Not came out of the recession. He nodded but said that with a new venture it is important to know how the economy will play out.

Jeff Nolan, a former venture capitalist and now at Newsgator, said that a lot of money moved away from VC funds and into hedge funds. Now, the large institional investors will be rebalancing their portfolios and more money will come into VC funds.

James Fisher, a local entrepreneur says that M&A in the valley is going to be disrupted by the turmoil in the investment banking sector. Investment Banking Crisis Will Freeze Silicon Valley M&A Deals

The business of the Long Tail is the concept that there is money to be made in services and products with a potential market of just a few people.

We can see Internet companies exploiting such micro-markets everywhere, well before the concept was popularized by Chris Anderson, editor of Wired magazine in October 2004.

We see it in Amazon and Ebay, they host the many millions of small markets that are interested in obscure books or collectabilia.

We see it in Google, which monetizes interest in the most obscure parts of its index. We see it in MySpace and Facebook, which seek to monetize markets that can consist of many thousands of "friends" but are mostly groups of just a few dozen people.

The trick to success is to have as many Long Tail markets as possible. Each micro-market generates micro-profits therefore the more the better.

Selling free content...

If you can get that Long Tail content for free, that's the best kind because producing content is expensive. For example, Flickr, a Yahoo company, hosts people's photos for free. In exchange for free hosting it sells advertising around the photos.

Users come back to visit their photos, and they also share them with friends, and sometimes complete strangers are attracted to the photos too. That's a lot of free traffic and you can make money from traffic.

YouTube hosts people's videos for free and in exchange it sells advertising around that content. Again, as in the Flickr example, users created the content, and brought traffic to that content, and YouTube monetized that traffic.

Not a bad business model and one copied many times over: user generated content comes with its own viral marketing, which equals free monetizable traffic. And user generated content can sometimes catch much larger viral traffic, such as LonelyGirl15, or a skateboarding dog.

Facebook viral marketing tools built-in...

MySpace and Facebook are examples of trying to grab even larger amounts of user generated content. On Facebook I can upload my videos, photos, blog posts, movie tastes, etc.

It also provides me with viral marketing tools through my news feed which automatically informs my friends of what I've done, "Tom uploaded photos, Tom wrote a blog post," etc.) I didn't have to email, or text, or twitter anyone at all, Facebook did it all automatically.

Again, it is the same type of business model: user generated content of all types, aided by automatic viral marketing tools, creates more monetizable traffic.

This is the business of the Long Tail, making money from tiny markets. And this has been the business of the Internet in one form or another, for two decades.

How much can be made from the traffic to my YouTube videos? Not much. How much money can be made from traffic to my Flickr photos? Not much. But aggregate many millions of such tiny long tail markets and you can make billions in revenues and hundreds of millions in profits.

Profits from free content...

It's not a bad business: you get the content created for free, and you get the traffic for free. It is like having a shop with many customers buying products you obtained for free. Your cost is the store rent and cashiers to take the money.

Another cost is the warehouse space. In the online world the warehouse is your data storage systems, which is far, far cheaper than physical warehouse space. Hosting digital content such as photos, blog posts, video, digital books, etc is extremely inexpensive. That is why Google, Amazon, MySpace, etc, are profitable - their costs of doing business are less than their revenues.

As long as user generated content keeps flooding in, it brings its own traffic, and that fuels the business.

-As long as people keep creating new online content, Google will index it (and store a copy) and make money from the traffic that seeks that content.

-As long as people create content for free, and upload videos to YouTube, or photos to Flickr, the same business dynamics apply. As user generated content increases, it leads to more traffic, which leads to more profits.

The burden of free...

What would happen if user generated content decreased? Clearly, it would lead to less traffic and lower profits.

What could lead to a decrease in the amount of user generated content?

Consider this scenario:

The cost of hosting the massive amount of long tail content, all the photos, video, etc is very small. As the amount of this content increases, the hosting costs rise.

As long as traffic also rises, the costs of business remain in balance with the rise in revenue.

But traffic growth is limited. There is a limited number of people in the world, there is a limited number of hours in a day. There are fundamental limits to the rate of growth of traffic.

But the amount of content collected by Google, Flickr, or YouTube, for example, grows much faster, and there is ever more of it that has to be stored and hosted. There is a legacy mountain of content and it's becoming a mountain range.

That means expanding your data storage systems, that means more power needed to drive those systems, it means administering the storage systems, which is people intensive, the data has to be made secure, the data has to be backed up. These are the exponential rising business costs of Long Tail economics.

As the number of long tail micro-markets increases, the less profitable each one becomes. This is because each long tail micro-market competes with an increasing number of other long tail micro markets.

More of any product or service means less revenue for that product or service. A current example: more housing on the market means a lower price for housing. Same thing applies in any market.

There is no way that increases in Internet traffic can keep pace with the growing number of long tail micro-markets.

The costs of hosting long tail micro-markets will continue to increase until they exceed the profits that can be made from them.

I was recently speaking with David Scott, CEO of 3PAR data storage systems, and he pointed out why 3PAR stays away from certain markets.

I might view a photo of my grandma, and that might be once a year or less. Yet that data still has to be hosted, secured, managed, and backed up. What is the business case for that photo? The cost of keeping that photo and others like it, will continually force companies to cut their storage costs and that will lead to them to storing the data themselves on cheap disk drives.

High traffic from skateboarding puppies, or Brittany Spears photos can subsidize hosting Mr Scott's grandma photos but that is only true for now.

At some point, businesses will be chocking on the costs of supporting the Long Tail of data that makes up their micro-markets. The costs of the Long Tail will twist tighter around the neck of profitability. What happens then?

Dump the grandma photos...

Companies have a fiduciary duty to their shareholders to maximize profits. They will have to dump the data, dump the grandma photos.

That means dumping the many links that users created to their content. The idea of permalinks, links that will remain rooted forever in the concrete of the Internet will become a fallacy.

Even though the online companies make no guarantee in their terms of service that users' content will be always available there is an implicit guarantee that user content will be always be there. When that implicit contract is broken users will be less willing to spend all that time uploading and tagging their content.

They'll be less willing to tell their friends about it, to post links to it, etc, because there is no guarantee it will be there next year or beyond.

That's the scenario that will dry up the flood of user generated content to online firms. And that is the great flaw in the business of the Long Tail.

Businesses making money from the economics of the Long Tail will be dragged under by mounting costs of maintaining Long Tail micro-markets.

Maybe this should be the title of my upcoming book: "The Unbearable Burden of the Long Tail - How Internet Commerce Will have to hack-off the Long Tail to Survive."

[Saturday Post is the name of a series of essays. This is the first in that series.]

Please also see:

Long Tail Economics - Bonanza or Bogus

Have we misinterpreted the business value of the long tail?

Toktumi and Adify are two companies that are worth singling out from this week's announcements at Demo 08 and elsewhere...

Toktumi is an interesting telephony startup. I spoke with Peter Sisson, the founder of Toktumi. He described the service as the "Skype of the hosted PBX market." It is focused on the very small business market, 1 to 9 employees is the sweet spot.

Getting started is easy, Toktumi provides a free phone number and you can use it with the Toktumi client software (PC only Mac is coming) to receive calls and call other Toktumi users through a regular phone. Additional lines are $12.95 per month plus 2 cents per minute and it can be set up in less than five minutes.

It has deals in the works with office retail stores so that you can walk in and buy a Toktumi phone and service. Calls go through its own data center so that you never miss a call. And developers can use the Toktumi API to develop telephony applications for small businesses such as dental or medical offices.

Unlike consumer VoIP offerings, Toktumi provides the advanced features businesses require, and a few they've never seen before. Auto-attendant, call transfer, visual voicemail, instant conferencing, and call waiting are all standard. Toktumi's unique search dialing capability allows calls to be placed by typing a name or keyword of the person or product desired. Mobility is automatic: calls ring wherever you login: at home, the office, a hotel, or your cell phone if you are on the road.

More info on Toktumi

Adify enables publishers to create advertising networks and then manage their advertising inventory in real-time and sell a wide variety of online ads according to geography and time of day. It provides clients with a dashboard that shows the performance of individual sites and individual advertising campaigns.

The company has been winning some large publishers such as Martha Stewart Publishing. But it can also be used by smaller publishers (Silicon Valley Watcher ad network coming soon!). Adify takes a cut of 12 per cent to 20 per cent of the advertising revenue.

Also, the company's platform has been certified by the IAB, which makes sure that its metrics accurately count advertising impressions. Only 12 ad serving technologies have this certification, says Joelle Gropper Kaufman, VP of marketing.

However, it doesn't work with RSS only with display ads on a web page. An interesting beta project is the development of widgets for distributing content between web sites within a network to help drive traffic.

Adify seems to be very well positioned for becoming the standard interface for the management of advertising networks.

More info on Adify.

Technorati Tags: adify, toktumi

It's the short fat part of the tail that matters. Yet I meet so many companies that miss significant opportunities.

So many startups have business plans that predict riches can be found in the long tail of commerce. Yet their first target should be the fat, high margin sector of any commercial market. You can always slide down the value chain over time and monetize the long tail.

Which is why you should be wary of companies that are focused on the long tail first rather than later.

Technorati Tags: long tail, startups

I spent Saturday afternoon in Palo Alto crammed into a room filled with about a hundred developers who were trading tips and sharing presentations on creating Facebook apps.

The enthusiasm was electric, it felt like the Homebrew Club, early pioneers encouraging each other.

Facebook has overwhelmed the web 2.0 social media sector in the same way hurricane Katrina overwhelmed New Orleans. It is a dramatic metaphor but a fair one.

If you are not thinking about developing Facebook apps then you should be. I've got great video coming from Saturday's Facebook Developer Garage that will appear on TechOne. Be sure to subscribe so you don't miss it. You won't regret it.

Do you have a business or are you a widget?: It is a variation on Larry Ellison's question about enterprise software companies: do they provide features or solutions?

It works in this era too. I come across too many startups that are great widgets but poor businesses.

Take a look at Facebook this company has managed to roll up much of Web 2.0, Twitter, flickr, LinkedIn, etc. All into one page.

Saturday afternoon I spent 3 hours looking at YouTube through the my FaceBook portal. YouTube is a widget on FaceBook. A $1.6bn widget.