In the money

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Yesterday’s Mix Session ‘Web 2.0 and Beyond: What Is the Business Reality?’ would more accurately have been called ‘how are we going to make money out of this stuff?: no new information here’.

Panelists were Bryan Biniak of Jacked, Tim Kendall of Facebook, the ever charming Loic Le Meur, now of Seesmic, and brainiac Chris Saad of the data portability project. The host was Frank Arrigo of Microsoft (his write-up here).

All very promising, but unfortunately it was all over almost before it began as TechCrunch (see their article) asked the first question: ‘Are any of you planning on getting a business model anytime soon?’. A simple enough question you might think, but one that was met with… well… nothing. Loic Le Meur opined that not wanting to know where the revenues were coming from was the hall mark of an enlightened investor these days – palpably a ridiculous comment anywhere but in our current 1999-deja-vu-fest.

Tim Kendall suggested brands should get the audience first and think about money later. Well OK, but how much later? Given that Facebook now definitely has the audience. This is, bear in mind, coming from someone who’s job is to look after monetisation of Facebook.

Loic did add that the options are advertising, ‘pro-‘ versions, and creating a resalable platform. Of course the number one ‘monetisation’ strategy of .coms always has been and always will be to sell themselves to someone else.

Biniak was unique amongst those on stage for having a business that you could sort of see where the money might come from – creating a sort of TV ‘plus’ space for advertising, although that doesn’t take account of how much might have to be paid out to legitimise the content in the first place.

The main reason most people were at the event – I’m sure – was to hear if Facebook does indeed have a secret plan to make money, especially after the bizarrely revealed company’s earnings. Kendall warmed a little in the middle with a couple of interesting ideas, saying the site’s goal was for the ads not to feel like ads because they were so tailored. especially where friends preferences could be re-cycled to encourage word of mouth. There is, he tells us, great click through rates on their ‘social ads’, although he then suggested these rates were ‘almost double’ normal ads – so therefore twice virtually nothing.

I find a great deal of fault with this formula. Social ads might sell me an iPod or the latest marketing text book, but it will not sell me heamorraoid cream. And if I’m buying a car, I will ask my friends myself for recommendations – so how will Facebook get to charge for that? selling is simply NOT all about targetting, and – this is a well rehearsed argument – timeliness is the most important factor in relevance, and when I’m on Facebook, I don’t want to buy cornflakes or whatever someone is trying to sell me (this is why, of course, ad words are so valuable).

After a bit of prodding Kendall started talking turkey. While saying it wasn’t what was happening on Facebook (and a somewhat bizarre  dig at Microsoft which sells display advertising on the site), he suggested that 10c might not be an unreasonable CPM rate for what display was currently selling at on the site. Search by contrast is more like $60. If Facebook could get it up to $1 he argues, that would be a very big business.

The sheer vagueness of this claim seems to me to be quite outstanding. Even if that is is the end game, the sums don’t appear to add up, and in any case, and it is essentially a goal of increasing selling price 10 fold without any visible corresponding strategy.

Chris ended the session on an interesting note talking about ‘VRM’ – vendor relationship management, which is essentially the idea that consumers could get paid to get advertised to. Clearly the detail of getting that to work is incredibly difficult but it remains a lot more plausible than some of tonight’s more whimsical musings.

Monkeying around

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If yesterday’s Mix keynote was all about products and developers, today’s was all about Ballmer himself, who was interviewed on stage by Guy Kawasaki.

Kawasaki, an ex-apple evangalist,  pulled no punches – poking Ballmer on Vista, Google,  Yahoo and Apple, as well as some pretty suprising jokes about chair throwing, anti-trust hearings and Ballmer’s infamous monkey boy dance.

All of these were met with surprising good grace (although his less calm side never seemed too far from the surface). At one point, Ballmer even performed a brief  minor variation of his dance on the request of one of the audience members, changing it to ‘I love web developers’. And, at one point we saw Ballmer goofing around and pretending he couldn’t carry Kawasaki’s MacBook Air because it was too heavy, and offering to get him ‘a proper machine’.

The strategy position in general was pretty clear. On the subject of Yahoo, the reason for the purchase it that Microsoft sees search as the killer app of online advertising, and it sees (as we heard yesterday) online advertising as its key monetisation strategy. The greatest ‘synergy’ is pure scale. Does winning mean beating Google? Is it a zero sum game? Yes.

However, whilst Google was the enemy in Microsoft’s online ambitions, Ballmer made it clear that there were other competitors in the other major markets they operate in: desktop, server and enterprise, entertainment and devices. The competitors ranging from IBM to Linux.

One of the overriding messages of Mix08 however, has been that the other fights aren’t necessarily zero sum games, with Microsoft showing a genuine drive to interoperability in many spaces. Are they serious about this? Well AOL and DoubleClick were on stage at the key note, showing how their technologies fit with various Microsoft platforms. It all seems pretty genuine and various people have commented in a palpable change in the way Microsoft is now dealing with the outside world.

Interesting to hear Ballmer describe Microsoft’s Search offering as the ‘little engine that could’, and to point out that the giant was very much the underdog both here and in the personal devices market.

What about Facebook? He made it pretty clear the 2% stake in Facebook was a relatively small deal for Microsoft and that he cared more about their advertising ‘partnership’ with the social network than their stake in it; validating the view that the shareholding is a purely defensive manoeuvre.

The question and answer session came to a close with a very bizarre and slightly uncomfortable question from an employee at Avenue A Razorfish, part of aQuantive which Microsoft bought last year to get their hands on Atlas.

As a lot of people have noted, Microsoft is in a difficult position with Avenue A because of their relationship with other agencies. It’s been assumed it will be run independently or sold off. But the question from one of its staff in such a public forum: ‘What are your plans for us, we hear a lot of rumours’, must still have come as a bit of a surprise.

Ballmer seemed unphased, and said the business would be left to run independently so long as it remained profitable but I wonder if any chairs went flying after he exited the stage.

(More here)

Heads in the clouds

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I’m at the Microsoft Mix08 show in Las Vegas with Conchango this week.

There were some interesting thoughts in the keynote presentations that kick off the conference. Apart from some pretty unveiled comments about Yahoo, Chief Software Architect, Ray Ozzie very explicitly talked about the challenges which he sees facing Microsoft in the next few years.

They basically come in just two categories:

The role of advertising

An expectation that advertising revenues online will grow from $40bn to $80bn in the next three years, Microsoft clearly wants to be part of that. That means both creating advertising models of their own and creating tools that enable developers to use Microsoft technologies to monetise their output.

The role of the web

A fairly open nod to the threat/opportunity that ‘cloud’ thinking presents for Microsoft’s traditional software, and increasingly, devices and content marketplace.

He walked through the practical implications of this for Microsoft’s key business areas

1. For personal

The development of connect frameworks (over the net) for keeping devices (‘device mesh’) synched and updated (side loading), and from there, enabling social connections / self expression, from the basis of either entertainment or gaming (‘social mesh’).

2. For business

The drive is from the basic data centre approach, through ‘utility computing’ using virtualisation to distribute and enable services away from the single ‘application’ server approach, and finally to move on to cloud computing.

3. For Developers and designers

Of course the paradigms above – cloud computing from a consumer point of view, cloud computing from an enterprise deployment point of view and developing for a range of different, interlinked devices, will have significant impacts on how developers will have work, how they will learn to design architectures and software.

Ozzie then went through Microsoft’s offering’s across these five areas, although at this point, Vista decided to do a number on me so you’ll have to watch the video for that I’m afraid.

  1. Connected business
  2. Connected entertainment
  3. Connected productivity
  4. Connected devices
  5. Connected development

The remainder of the presentation was led by Scott Guthrie who ran through the features of today’s key releases: IE 8, Silverlight, and some new features and performance improvements to be added to Windows Presentation Foundation (WPF) later in the year.

Dean Hachamovitch (top) came on to present IE. The headlines are that IE8 will make a serious attempt to realign with core interoperability standards, and a step towards HTML 5, as well as incorporating some very interesting atomisation features. Even to the extent that it will render some pages which work well in IE7, IE8 will behave like Firefox and Safari(although a sort of IE7 quirks mode can be forced with a meta tag). This, unsurprisingly was very popular with today’s primarily developer audience who currently have to create various hacks or multiple style sheets to achieve consistent output. Promises of performance improvements (in page rendering etc) also went down well.

The nods to HTML 5 are better handling of the back button for Ajax style interfaces, connection awareness in the DOM (so different action can be taken for offline pages), and DOM storage (the ability to store data locally). All looking good. Also good, although not ground breaking were built-in developer tools.

The next two items however (about 45 minutes into the key note), were more interesting. They’re interesting in part because they provide rich frameworks for ‘atomising’ content and function; and in part because they are very serious efforts by the software giant to create new but open standards (and have been licensed as such).

The first is Activities – the ability for developers to create custom in page functions for acting on in-page content, for example, by looking up a location on website, finding a product on Ebay, searching for terms in Google.

The second piece is ‘Webslices’, a simple mark-up framework for developers to syndicate page areas which then appears in small pop up windows in IE. Nice stuff, and it will be fascinating to see if Mozilla takes it on board or tries to make their own. 

For Silverlight we got a raft of improvements:

  • Adaptive streaming
  • Flexible settings for progressive download
  • Integration with CDN and Server 2008
  • New, skinnable controls
  • Fully working CLR
  • Databinding
  • Unit testing framework
  • Cross-domain capabilities
  • Strong networking features
  • Integration of Seadragon (a powerful image zoom and progressive loading technology – see http://memorabilia.hardrock.com)

We also saw a number of sites who’ve already adopted the technology, most notably a very compelling demo of what NBC is planning for the Olympic Games coverage this year.

The Olympics section is (about 1h20m in) well worth a watch. The new site is set to include picture in picture, live and on-demand across 22,000 hours and 25 sports, visual search and browse, pre-roll ads.

A number of the other features and applications are demonstrated too, mostly in a pretty convincing way.

The last piece was Silverlight on mobile. The announcement being that Nokia will include it on some symbian phones – and it is already part of the mobile platform.

As it always seems to be it’s early days for mobile, but it’s true to say that they have made it work, although details were a little scarce, as were any features of the demo that really added value which couldn’t have been done in HTML.

Microsoft!

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An interesting headline in yesteday’s Standard. Something tells me they haven’t quite got the hang of this internet thing.

The huge and hostile $44bn bid Microsoft has planned for Yahoo! will doubtless fuel the ongoing religious debate between the brands.

Google of course has come out with a statement that it has ‘serious concerns’ about the deal.

Bear in mind that this is the company that has been buying everything from video sharing sites to mobile phone companies, that is bidding for a chunk of the radio spectrum in the states, and recently bought one of the internet’s biggest advertising solution providers.

And yet, everything that Google does is met with blithe indifference, while Microsoft is accused of witchcraft and human sacrifice every time they so much as spend a billion pounds.

Doesn’t all of this make us think of what Hugh MacLeod is trying to do with the Blue Monster, allowing the 1,000s of Microsoft staff who – believe it or not – turn up for work everyday full of positive intent to tell their own stories rather than being at the mercy of their detractors and the press.

No zealot like a convert

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I’ve been thinking a lot recently about what it is that companies like Apple actually do to inspire the kind of religious fervour we’ve seen recently in the lead up to CES, and journalists and fans alike clamber over each other to make wilder and wilder predictions over the next miracle that Jobs will announce.

I’ve been round this loop myself a couple of time. At college we produced the student newspaper in a tatty room in the student union on a couple of Mac SEs. System 7 had just come out and we thought we were right at the cutting edge of technology. Then, as now, we looked down with a kind of pity on the PC people who we suffering with ugly boxes, impossible interfaces, and ‘general protection faults’.

And then Apple started going wrong, and their machines would crash just as much as as the PCs. Then Microsoft got NT4 out. And that really did never crash. And all of a sudden, the mac people seemed like the ones with the slightly deranged thinking. PC people were sensible because the kit was cheaper, and more flexible, and more hackable.

And now of course, it’s back the other way round. Vista’s pretty sucky (although it’s likely to improve dramatically at SP1 – like XP did). OS X is more stable and has reclaimed the interface ground that System 7 had all those years ago.

But of course, it’s not really about which is actually better. In an interesting interview with Gizmodo (where he also admits Vista is not a great product), Bill Gates makes a very interesting point:

“To the degree we can share the risk we’re taking and how our innovation comes through, we get a very positive image; to the degree that someone just got a few error messages or they think all big companies, or some specific thing we did, is arrogant, we get a negative message. It’s all going to be there. Maybe it reached a particular time period when we were having some court cases going on and people thought start ups were the source of all innovation. Xbox has helped, Zune has helped. There is a lot of data that people  have to process when you say ‘What do you think of Microsoft or the people that founded it’

So Apple, Microsoft or whoever might do good things, might do bad things but there will be a lag between what they do and their reputation capital. The brand will be insulated from at least some shocks, because people have a lot of data about it, all added together. So my new shiny iPod Touch has been going through a bit a period of crashing all the time. Does this make me re-evaluate Apple and their engineering standard? Well it will if they don’t get it fixed fairly quickly, but they’ll get away with it for the time being.

And the other thing, is that people strive for internal consistency. And they invested alot – financially and emotionally – in this platform decision. Backing Mac is more than a tech gamble. It’s a statement about the user too. And to change sides means reevaluating yourself as well as the box in the corner of your lounge.

Music business

 Bill Gates with a Zune (photo Reuters)

Couple of good quotes / stories I found in a desperate attempt to do some catch-up reading of my Economist stockpile. Strangely enough both items from the same page in the July 7th issue (p. 69).

In A change of tune  (paywalled), we have Warner Music chairman, Edgar Bronfman saying “The music industry is growing, [but]… The record industry is not growing.” In these few short words, he’s surely captured an important truth.

Interest in music and music listening has probably never been more healthy, but the record companies seem unable to find a role for themselves. The economist writer moves on to suggest that artists will replace their lost (record sale) revenues with tours, merchandise and personal appearances, leaving the labels to become glorified managers. The tracks themselves become marketing material for the artists. Seem far-fetched? Look at how Prince took his latest album to market – as a ‘free’ giveaway on the Mail on Sunday.

An interesting piece, although there remains the huge hole in the rights debate about what on earth might happen to great film and TV shows, how do they get paid for? If we want Studio 60 and The Shawshank Redemption, we’re going to have to fund them.

The second piece is an article about the release of the iPhone: Where would Jesus queue? (also paywalled). Having marvelled at the hype, fervour and – perhaps most impressively – lack of disappointment once in consumers’ hands, which surrounded the launch of the “Jesus phone”, the writer recounts a story from outside the store where he was queing.

It seems a passerby who had just arrived from Mars wanted to know what the queue was for. “What are you all standing in line for?” she asked. The response from some wag in the queue was “Zunes!”. That’s a good joke and it goes to really demonstrate the extent to which Apple has captured the public’s imagination with innovation and great, user-centred design.

The Bill and Steve show

Gates and Jobs (read the body language!)

When it comes to technology innovation, it’s interesting to hear some people still talk about a “five-year plan”. After all, YouTube went from zero to £1.65bn in 18 months. Google only lost their beta tag 7 years ago. Paradigms can change literally overnight.

In this fascinating interview, Jobs and Gates reveal that they’ve not got a clear view five years out, although they both broadly are expecting hardware to continue to evolve in a fairly linear way. Gates is sticking to his software-only stance (noting the exception of the X-box, the new and very exciting surface computing – although I’m not sure why that couldn’t be a pure software play for Microsoft – , a new meeting conference hardware called round table, and of course the ill-fated Zune).

While Jobs is clearly still in the hardware+software mode, he sees software as the driver, simply noting that he will continue to make the “nice boxes”. He sees the ipod’s dominance for example as a result of great software. And indeed the majority of the criticism of the Zune has been software related, and that certainly would seem to be the biggest barrier to adoption.

Both believe that users will continue to have multiple devices. Basically this means a laptop (or tablet), a mobile phone (or “post pc” device as Jobs calls it, pesumably to make the iPhone even more significant) and home entertainment equipment which will include what’s been done with media centre but will also, surely, extend to include ubiquitous computing device like the Surfaces product mentioned above.

As well as 3D visual interfaces, which have not yet lived up to their promise, Gates identified other changes in input method as big driver. In fact he talked about several different input methods – the multi-touch approach that Jeff Haan has been on about for years and appears in Surfaces and on the iPhone; what I would call passive video input – again on Surfaces, this is cameras which map how devices relate to each other (well worth watching the demo for that), and possibly in whatever this conference tool is to identify who’s speaking or presenting; and finally a general nod in the direction of natural language input.

Jobs was very tight lipped about innovation although dropped a few hints about improving .mac, most likely in some sort of 2.0, SNS kind of direction. Hugh MacLeod also spots a vieled comment from Gates about re-entering the internet space with renewed vigour from Gates. I’d guess he’s refering the Live Services platform but who knows, perhaps there’s something else about to be launched. I wonder if Hugh knows more than he’s letting on.

Both men seemed suprisingly oblivious to the threat posed by SaaS to their desktop operating systems, with both citing a mix of local applications with cloud services in support.

Interestingly, Jobs also argued that a turning point for Apple’s corporate strategy was when they realised that their success was not contingent on Microsoft’s failure, although his attempt to characterise the “Mac vs PC” advertising as not attacking Microsoft was rather unsuccessful.