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The Internet Big Five: Up $272 Billion in Six Months

By - May 17, 2012

Last December I posted on “The Internet Big Five,” noting their relative strengths and the market cap of each. Since that time, the Five have only gotten stronger, adding a cumulative $272 billion in market cap (much of that is Apple, but Amazon and Facebook – assuming the offering does as expected on Friday – have also increased quite a bit). All in all, nearly 30% increase in value for these five companies – sort of makes me wish I was an investor, rather than a writer and entrepreneur.

I’ll also check the number of engaged users for each platform, to see if there are any significant shifts, though I don’t recall seeing any in the news recently (save Facebook crossing 900 million users). It is interesting to note that Facebook, should it hold its supposed valuation, will be more highly valued than Amazon.

A reminder as to why I’ve made a point of watching the Big Five, from my original and secondary posts:

..there’s more to the selection of this Big Five than just market cap. In fact, there are four main criteria for making it into the Big Five.

First, as I began to describe above, the companies must have financial heft, both in terms of large equity capitalizations, significant cash on hand, and a defensible core profit making machine. This gives them the ability to throw their weight around: they can make strategic acquisitions (like Google’s acquisition of Motorola), and they can leverage their profit centers and cash positions in any number of ways that offer them flexibility to play the corporate game at the very highest levels.

Second, the companies must have scale in terms of direct reach to consumers. By this I mean their brands are used as meaningful platforms by hundreds of millions of people on a frequent basis.

Third, the companies must have deep engagement with those consumers, the kind of engagement that builds brand and creates massive stores of useful data. The relationship between the brand and its customer has to be meaningful and consistent (therefore creating permission to extract a premium and offer new products and services). It takes an ongoing service relationship for such engagement to occur….

 

More on the product strength of the Big Five here.

 

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Get to Know Ross Levinsohn

By - May 13, 2012

The remarkable news today that, among other important board moves, Ross Levinsohn will take over as interim CEO at Yahoo may well mark the end of an era – should his tenure stick, perhaps we can stop talking about the web pioneer in past or conditional tenses. If you’d like to get to know him a bit better, here’s an interview I did with him at Web 2 last Fall.

The Audacity of Diaspora

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Last Friday Businessweek ran a story on Diaspora, a social platform built from what might be called Facebook anti-matter. It’s a great read that chronicles the project’s extraordinary highs and lows, from Pebble-like Kickstarter success to the loss of a founder to suicide. Given the overwhelming hype around Facebook’s IPO this week, it’s worth remembering such a thing exists – and even though it’s in private beta, Diaspora is one of the largest open source projects going right now, and boasts around 600,000 beta testers.

I’ve watched Diaspora from the sidelines, but anyone who reads this site regularly will know that I’m rooting for it. I was surprised – and pleased – to find out that Diaspora is executing something of a “pivot” – retaining its core philosophy of being a federated platform where “you own your own data” while at the same time adding new Tumblr and Pinterest-like content management features, as well as integration with – gasp! – Facebook.  And this summer, the core team behind the service is joining Y Combinator in the Valley – a move that is sure to accelerate its service from private beta to public platform.

I like Diaspora because it’s audacious, it’s driven by passion, and it’s very, very hard to do. After all, who in their right mind would set as a goal taking on Facebook? That’s sort of like deciding to build a better search engine – very expensive, with a high likelihood of failure. But what’s really audacious is the vision that drives Diaspora – that everyone owns their own data, and everyone has the right to do with it what they want. The vision is supported by a federated technology platform – and once you federate, you lose central control as a business. Then, business models get very, very hard. So you’re not only competing against Facebook, you’re also competing against the reality of the marketplace – centralized domains are winning right now (as I pointed out here).

It seems what Diaspora is attempting to do is take the functionality and delight of the dependent web, and mix it with the freedom and choice offered by the independent web. Of course, that sounds pretty darm good to me.

Given the timing of Facebook’s public debut, the move to Y Combinator, and perhaps just my own gut feel, I think Diaspora is one to watch in coming months. As of two days ago, the site is taking registrations for its public debut. Sign up here.

Curtain Raiser: The CM Summit in NYC Next Week

By - May 10, 2012

The Soho Skylight, awaiting its incarnation as site for the 7th annual CM Summit.

As New York City gears up for its annual Internet Week, the team at FMP has been diligently working away on creating another stellar program for our 7th annual CM Summit, held this coming Monday and Tuesday in SoHo.

Last year we eliminated panels from our program, the move was met with great success – attendees love our fast-paced approach, which features short, high-value presentations from leaders in digital marketing and technology platforms, interspersed with conversations with CMOs from Fortune 500 brands and entrepreneurs driving change in digital.

Monday kicks off at 2pm with one of New York City’s media elites — Barry Diller of IAC, Expedia & Trip Advisor. Diller is more recently known for backing the controversial streaming video startup Aereo as well as high-flyer Pinterest. After his conversation, we move into a rapid fire succession of presentations including Joe Frydl, recently appointed SVP of Marketing at FMP, who sets the stage for this year’s theme with his talk on The Law of Content on the Web.

That’s a perfect segueway to our next speaker, Linda Descano, President & CEO of Women & Co., a service of Citi that brings together the voices of independent writers on relevant and thoughtful financial content. Linda is also a Managing Director and the Head of Digital Partnerships for North America Marketing at Citi, driving brand health and customer engagement goals.

After a deep focus on content, we move to the world of analytics with Amy Chang, Head of Product for Google Analytics, who will show and tell the Next Generation of Measurement. Amy is followed by Terence Kawaja of LUMA Partners, who gives his State of the State, a detailed look at today’s marketing landscape in line with the conference theme of Marketing from the 30,000-Foot View. Expect to laugh a few times….

Post refreshments, we continue with a series of conversations with Lisa Weinstein, President of Global Digital & Search at Starcom MediaVest Group; Sarah Bernard, Deputy Director of The White House Office of Digital Strategy; and Alfredo Gangotena, Chief Marketing Officer of MasterCard.

Day one’s sponsor spotlight is Luminate. CEO Bob Lisbonne takes us on a visual journey that highlights New Opportunities for Consumers, Publishers & Brands.

Tuesday, May 15th presents a full conference day that begins at 9am sharp with an intellectual and entertaining conversation with one of Silicon Valley’s most well-connected investors, Ron Conway of SV Angels. From there we move forward with a day centered around the industry’s major technology platforms with presentations from Microsoft, Twitter, Nokia, Tapjoy (a youthful yet successful startup that’s creating a marketplace for mobile games), Salesforce.com, and StumbleUpon.

Day two conversations feature:

  • Marc Speichert, Chief Marketing Officer at L’Oreal USA, not only responsible for driving and enhancing innovation for the company’s Consumer, Luxury, and Professional Products, as well as Active Cosmetics, in this role, Marc also runs Corporate Strategic Marketing, Media & Digital, and Consumer Market Intelligence.
  • Jim Lanzone, President of CBS Interactive, on a discourse about the current and future state of premium video content and Internet video channels.
  • Clara Shih, Founder of enterprise social media software company Hearsay Social and New York Times bestselling author of The Facebook Era: Tapping Online Social Networks to Market, Sell and Innovate. 
  • Alison Lewis, who’s official title of SVP of Marketing for North America at The Coca-Cola Company really translates to being the force behind how one of America’s historic companies maintains its brand leadership.

To add a little visionary spice to the mix, I’ll also be interviewing Gil Elbaz, an accomplished entrepreneur and pioneer of natural language technology. As the CEO of Factual, Gil lives in “the data layer,” making data more accessible for machines, developers, and marketers.

Additional companies presenting include The Wyndham Hotel Group, Sharethrough, and Upworthy. These sessions help highlight how existing content around the web can create real business ROI with just the right amount of attention and curation.

Day two’s sponsor spotlight is Meebo. CEO Seth Sternberg will focus on how to Balance User Experience with Revenue Generation. 

We bring the event full circle with closing conversations by two well-respected figures in New York’s digital marketing community: Randall Rothenberg, President & CEO of the Interactive Advertising Bureau (IAB), and Susan Sobbott, President of American Express OPEN.

This year the CM Summit has moved venues, and will be hosted at Skylight Soho (pic above), a creative and beautiful loft space custom-built to accommodate both CM Summit audiences, and the IAB conference which follows.

If you have not already done so, buy your tickets today, and we’ll see you at the CM Summit. 

Larry Lessig on Facebook, Apple, and the Future of “Code”

By - May 09, 2012

Larry Lessig is an accomplished author, lawyer, and professor, and until recently, was one of the leading active public intellectuals in the Internet space. But as I wrote in my review of his last book (Is Our Republic Lost?), in the past few years Lessig has changed his focus from Internet law to reforming our federal government.

But that doesn’t mean Lessig has stopped thinking about our industry, as the dialog below will attest. Our conversation came about last month after I finished reading Code and Other Laws of Cyberspace, Version 2. The original book, written in 1999, is still considered an authoritative text on how the code of computing platforms interacts with our legal and social codes. In 2006, Lessig “crowdsourced” an update to his book, and released it as “Version 2.0.” I’d never read the updated work (and honestly didn’t remember the details of the first book), so finally, six years later, I dove in again.

It’s a worthy dive, but not an easy one. Lessig is a lawyer by nature, and his argument is laid out like proofs in a case. Narrative is sparse, and structure sometimes trumps writing style. But his essential point – that the Internet is not some open “wild west” destined to always be free of regulation, is soundly made. In fact, Lessig argues, the Internet is quite possibly the most regulable technology ever invented, and if we don’t realize that fact, and protect ourselves from it, we’re in for some serious pain down the road. And for Lessig, the government isn’t the only potential regulator. Instead, Lessig argues, commercial interests may become the most pervasive regulators on the Internet.

Indeed, during the seven years between Code’s first version and its second, much had occurred to prove Lessig’s point. But even as Lessig was putting the finishing touches on the second version of his manuscript, a new force was erupting from the open web: Facebook. And a year after that, the iPhone redefined the Internet once again.

In Code, Lessig enumerates several examples of how online services create explicit codes of control – including the early AOL, Second Life, and many others. He takes the reader though important lessons in understanding regulation as more than just governmental – explaining normative (social), market (commercial), and code-based (technological) regulation. He warns that once we commit our lives to commercial services that hold our identity, a major breach of security will most likely force the government into enacting overzealous and anti-constitutional measures (think 9/11 and the Patriot Act). He makes a case for the proactive creation of an intelligent identity layer for the Internet, one that might offer just the right amount of information for the task at hand. In 2006, such an identity layer was a controversial idea – no one wanted the government, for example, to control identity on the web.

But for reasons we’re still parsing as a culture, in the six years since the publication of Code v2, nearly 1 billion of us have become comfortable with Facebook as our defacto identity, and hundreds of millions of us have become inhabitants of Apple’s iOS.

Instead of going into more detail on the book (as I have in many other reviews), I thought I’d reach out to Lessig and ask him about this turn of events. Below is a lightly edited transcript of our dialog. I think you’ll find it provocative.

As to the book: If you consider yourself active in the core issues of the Internet industry, do yourself a favor and read it. It’s worth your time.

Q: After reading your updated Code v2, which among many other things discusses how easily the Internet might become far more regulated than it once was, I found myself scribbling one word in the margins over and over again. That word was “Facebook.”

You and your community updated your 1999 classic in 2006, a year or two before Facebook broke out, and several years before it became the force it is now. In Code you cover the regulatory architectures of places where people gather online, including MUDS, AOL, and the then-hot darling known as Second Life. But the word Facebook isn’t in the text.

What do you make of Facebook, given the framework of Code v2?

Lessig: If I were writing Code v3, there’d be a chapter — right after I explained the way (1) code regulates, and (2) commerce will use code to regulate — titled: “See, e.g., Facebook.” For it strikes me that no phenomena since 2006 better demonstrates precisely the dynamic I was trying to describe. The platform is dominant, and built into the platform are a million ways in which behavior is regulated. And among those million ways are 10 million instances of code being use to give to Facebook a kind of value that without code couldn’t be realized. Hundreds of millions from across the world live “in” Facebook. It more directly (regulating behavior) than any government structures and regulates their lives while there. There are of course limits to what Facebook can do. But the limits depend upon what users see. And Facebook has not yet committed itself to the kind of transparency that should give people confidence. Nor has it tied itself to the earlier and enabling values of the internet, whether open source or free culture.

Q: Jonathan Zittrain wrote his book two years after Code v2, and warned of non-generative systems that might destroy the original values of the Internet. Since then, Apple iOS (the “iWorld”) and Facebook have blossomed, and show no signs of slowing down. Do you believe we’re in a pendulum swing, or are you more pessimistic – that consumers are voting with their dollars, devices, and data for a more closed ecosystem?

Lessig: The trend JZ identified is profound and accelerating, and most of us who celebrate the “free and open” net are simply in denial. Facebook now lives oblivious to the values of open source software, or free culture. Apple has fully normalized the iNannyState. And unless Google’s Android demonstrates how open can coexist with secure, I fear the push away from our past will only continue. And then when our i9/11 event happens — meaning simply a significant and destructive cyber event, not necessarily tied to any particular terrorist group — the political will to return to control will be almost irresistible.

The tragedy in all this is that it doesn’t have to be this way. If we could push to a better identity layer in the net, we could get both better privacy and better security. But neither side in this extremist’s battle is willing to take the first step towards this obvious solution. And so in the end I fear the extremists I like least will win.

Q: You seem profoundly disappointed in our industry. What can folks who want to make a change do?

Lessig: Not at all. The industry is doing what industry does best — doing well, given the rules as they are. What industry is never good at (and is sometimes quite evil at) is identifying the best mix of rules. Government is supposed to do something with that. Our problem is that we have today such a fundamentally dysfunctional government that we don’t even recognize the idea that it might have a useful role here. So we get stuck in these policy-dead-ends, with enormous gains to both sides left on the table.

And that’s only to speak about the hard problems — which security in the Net is. Much worse (and more frustrating) are the easy problems which the government also can’t solve, not because the answer isn’t clear (again, these are the easy problems) but because the incumbents are so effective at blocking the answer that makes more sense so as to preserve the answer that makes them more dollars. Think about the “copyright wars” — practically every sane soul is now focused on a resolution of that war that is almost precisely what the disinterested souls were arguing a dozen years ago (editor’s note: abolishing DRM). Yet the short-termism of the industry wouldn’t allow those answers a dozen years ago, so we have had an completely useless war which has benefited no one (save the lawyers-as-soldiers in that war). We’ve lost a decade of competitive innovation in ways to spur and spread content in ways that would ultimately benefit creators, because the dinosaurs owned the lobbyists.

—-

I could have gone on for some time with Lessig, but I wanted to stop there, and invite your questions in the comments section. Lessig is pretty busy with his current work, which focuses on those lobbyists and the culture of money in Congress, but if he can find the time, he’ll respond to your questions in the comments below, or to me in email, and I’ll update the post.

###

Other works I’ve reviewed: 

You Are Not A Gadget by Jaron Lanier (review)

Wikileaks And the Age of Transparency  by Micah Sifry (review)

Republic Lost by Larry Lessig (review)

Where Good Ideas Come From: A Natural History of Innovation by Steven Johnson (my review)

The Singularity Is Near: When Humans Transcend Biology by Ray Kurzweil (my review)

The Corporation (film – my review).

What Technology Wants by Kevin Kelly (my review)

Alone Together: Why We Expect More from Technology and Less from Each Other by Sherry Turkle (my review)

The Information: A History, a Theory, a Flood by James Gleick (my review)

In The Plex: How Google Thinks, Works, and Shapes Our Lives by Steven Levy (my review)

The Future of the Internet–And How to Stop It by Jonathan Zittrain (my review)

The Next 100 Years: A Forecast for the 21st Century by George Friedman (my review)

Physics of the Future: How Science Will Shape Human Destiny and Our Daily Lives by the Year 2100 by Michio Kaku (my review)

On Thneeds and the “Death of Display”

By - May 07, 2012

It’s all over the news these days: Display advertising is dead. Or put more accurately, the world of “boxes and rectangles” is dead. No one pays attention to banner ads, the reasoning goes, and the model never really worked in the first place (except for direct response). Brand marketers are demanding more for their money, and “standard display” is simply not delivering. After nearly 20 years*, it’s time to bury the banner, and move on to….

…well, to something else. Mostly, if you believe the valuations these days, to big platforms that have their own proprietary ad systems.

All over the industry, you’ll find celebration of new advertising-driven platforms that have eschewed the “boxes and rectangles” model. Twitter makes money off its native “promoted” suite of marketing tools. Tumblr just this week rolled out a similar offering. Pinterest recently hired Facebook’s original monetization wizard to create its own advertising model, separate from standard display. And of course there’s Facebook, which has gone so far as to call its new products “Featured Stories” (as opposed to “Ads” – which is what they are.) Lastly, we mustn’t forget the grandaddy of native advertising platforms, Google, whose search ads redefined the playing field more than a decade ago (although AdSense, it must be said, is very much in the “standard display” business).

Together, these platforms comprise what I’ve come to call the “dependent web,” and they live in a symbiotic relationship with what I call the “independent web.”

But there’s a very big difference between the two when it comes to revenue and perceived value. Dependent web companies are, in short, killing it. Facebook is about to go public at a valuation of $100 billion. Twitter is valued at close to $10 billion. Pinterest is rumored to be worth $4 billion, and who knows what Tumblr’s worth now – it was nearly $1 billion, on close to no revenues, last Fall. And of course Google has a market cap of around $200 billion.

Independent web publishers? With a few exceptions, they’re not killing it. They aren’t massively scaled platforms, after all, they’re often one or two person shops. If “display is dead,” then, well – they’re getting killed.

That’s because, again with few exceptions, independent web sites rely on the “standard display” model to scratch out at least part of a living. And that standard display model was not built to leverage the value of great content sites: engagement with audience. Boxes and rectangles on the side or top of a website simply do not deliver against brand advertising goals. Like it or not, boxes and rectangles have for the most part become the province of direct response advertising, or brand advertising that pays, on average, as if it’s driven by direct response metrics. And unless you’re running a high-traffic site about asbestos lawsuits, that just doesn’t pay the bills for content sites.

Hence, the rolling declaration of display’s death – often by independent industry news sites plastered with banners, boxes and rectangles.

But I don’t think online display is dead. It just needs to be rethought, re-engineered, and reborn. Easy, right?

Well, no, because brand marketers want scale and proof of ROI – and given that any new idea in display has to break out of the box-and-rectangle model first, we’ve got a chicken and egg problem with both scale and proof of value.

But I’ve noticed some promising sprigs of green pushing through the earth of late. First of all, let’s not forget the growth and success of programmatic buying across those “boxes and rectangles.” Using data and real time bidding, demand- and supply-side platforms are growing very quickly, and while the average CPM is low, there is a lot of promise in these new services – so much so, that FMP recently joined forces with one of the best, Lijit Networks. Another promising development is the video interstitial. Once anathema to nearly every publisher on the planet, this full page unit is now standard on the New York Times, Wired, Forbes, and countless other publishing sites. And while audiences may balk at seeing a full-page video ad after clicking from a search engine or other referring agent, the fact is, skipping the ad is about as hard as turning the page in a magazine. And in magazines, full page ads work for marketers.

Another is what many are now calling “native advertising” (sure to be confused with Twitter, Tumblr, and others’ native advertising solutions…) Over at Digiday, which has been doing a bang up job covering the display story, you’ll see debate about the growth of  publisher-based “native advertising units,” which are units that run in the editorial well, and are often populated with advertiser-sponsored content. FMP has been doing this kind of advertising for nearly three years, and of course it pioneered the concept of content marketing back in 2006. The key to success here, we’ve found, is getting context right, at scale, and of course providing transparency (IE, don’t try to fool an audience, they’re far smarter than that.)

And lastly, there are the new “Rising Star” units from the IAB (where I am a board member). These are, put quite simply, reimagined, larger and more interactive boxes and rectangles. A good step, but not a panacea.

So as much as I am rooting for these new approaches to display, and expect that they will start to be combined in ways that really pay off for publishers, they have a limitation: they’re focused on what I’ll call a “site-specific” model: for a publisher to get rewarded for creating great content, that publisher must endeavor to bring visitors to their site so those visitors can see the ads.  If we look toward the future, that’s not going to be enough. In an ideal Internet world, great content is rewarded for being shared, reposted,  viewed elsewhere and yes, even “liked.”

Up to now, that reward has had one single currency: Traffic back to the site.

Think of the largest referrers of traffic to the “rest of the web” – who are they? Yep – the very same companies with huge valuations – Google, Facebook, Twitter, and now Pinterest. What do they have in common? They’ve figured out a way to leverage the content created by the “rest of the web” and resell it to marketers at scale and for value (or, at least VCs believe they will soon). It’s always been an implicit deal, starting with search and moving into social: We cull, curate, and leverage your content, and in return, we’ll send traffic back to your site.

But given that we’re in for an extended transition from boxes and rectangles to ideas that, we hope, are better over time, well, that traffic deal just isn’t enough. It’s time to imagine bigger things.

Before we do, let’s step back for a moment and consider the independent web site. The…content creator. The web publisher. The talent, if you will. The person with a voice, an audience, a community. The hundreds of thousands (millions, really) of folks who, for good or bad, have plastered banners all over their site in the hope that perhaps the checks might get a bit bigger next month. (Of course this includes traditional media sites, like publishers who made their nut in print, for example). To me, these people comprise the equivalent of forests in the Internet’s ecosystem. They create the oxygen that feeds much of our world: Great content, great engagement, and great audiences.

Perhaps I’m becoming a cranky old man, a Lorax, if you must, but I’m going to jump up on a stump right now and say it: curation-based platform models that harvest the work of great content creators, creating “Thneeds” along the way, are failing to see the forest for the trees. Their quid pro quo deal to “send more traffic” ain’t enough.**

It’s time that content creators derived real value from the platforms they feed. A new model is needed, and if one doesn’t emerge (or is obstructed by the terms of service of large platforms), I worry about the future of the open web itself. If we, as an industry, don’t get just a wee bit better at taking care of content creators, we’re going to destroy our own ecosystem – and we’ll watch the Pinterests, Twitters, and yes, even the Google and Facebooks of the world deteriorate for lack of new content to curate.

Put another way: Unless someone cares, a whole awful lot…it isn’t going to get better. It’s not.

Cough.

So I’m here to say not only do I care, so do the hundreds of people working at Federated Media Publishing and Lijit, and at a burgeoning ecosystem of companies, publishers, and marketers who are coming to realize it’s time to wake up from our “standard display” dream and create some new models. It’s not the big platforms’ job to create that model – but it will be their job to not stand in the way of it.

So what might a new approach look like? Well first and foremost, it doesn’t mean abandoning the site-specific approach. Instead, I suggest we augment that revenue stream with another, one that ties individual “atomic units” of content to similar “atomic units” of marketing messaging, so that together they can travel the Seussian highways of the social web with a business model intact.

Because if the traffic referral game has proven anything to us as publishers, it’s that great content doesn’t want to be bound to one site. The rise of Pinterest, among others, proves this fact. Ideally, content should be shared, mixed, mashed, and reposted – it wants to flow through the Internet like water. This was the point of RSS, after all – a technology that has actually been declared dead more often than the lowly display banner. (For those of you too young to recall RSS, it’s a technology that allows publishers to share their content as “feeds” to any third party.)

RSS has, in the main, “failed” as a commercial entity because publishers realized they couldn’t make money by allowing people to consume their content “offsite.” The tyranny of the site-specific model forced most commercial publishers to use RSS only for display of headlines and snippets of text – bait, if you will, to bring audiences back to the site.

I’ve written about the implications of RSS and its death over and over again, because I love its goal of weaving content throughout the Internet. But and each time I’ve considered RSS, I’ve found myself wanting for a solution to its ills. I love the idea of content flowing any and everywhere around the Internet, but I also understand and sympathize with the content creator’s dilemma: If my content is scattered to the Internet’s winds, consumed on far continents with no remuneration to me, I can’t make a living as a content creator. So it’s no wonder that the creator swallows hard, and limits her RSS feed in the hopes that traffic will rise on her site (a few intrepid souls, like me, keep their RSS feeds “full text.” But I don’t rely on this site, directly, to make a living.)

So let’s review. We now have three broken or limping models in independent Internet publishing: the traffic-hungry site-specific content model, the “standard display” model upon which it depends, and the RSS model, which failed due to lack of “monetization.”

But inside this seeming mess, if you stare long and hard enough, there are answers staring back at you. In short, it’s time to leverage the big platforms for more than just traffic. It’s time to do what the biggest holders of IP (the film and TV folks) have already done – go where the money is. But this time, the approach needs to be different.

I’ve already hinted at it above: Wrap content with appropriate underwriting, and set it free to roam the Internet. Of course, such a system will have to navigate business process rules (the platforms’ Terms of Service), and break free of scale and ROI constraints. I believe this can be done.

But given that I’m already at 2500 words, I think I’ll be writing about that approach in a future post. Stay tuned, and remember – “Unless….”

———

*As a co-founder of Wired, I had a small part to play in the banner’s birth – the first banner ran on HotWired in 1994. It had a 78% clickthrough rate. 

**Using ad networks, the average small publisher earns about seventy-five cents per thousand on her display ads. Let’s do the math. Let’s say Molly the Scone Blogger gets an average of 50,000 page views a month, pretty good for a food blogger. We know the average ad network pays about 65 to 85 cents per thousand page views at the moment (for reasons explained above, despite the continuing focus of the industrial ad technology complex, which is working to raise those prices with data and context). And let’s say Molly puts two ads per page on her site. That means she has one hundred “thousands” to sell, at around 75 cents a thousand. This means Molly gets a check for about $75 each month. Now, Molly loves her site, and loves her audience and community, and wants to make enough to do it more. Since her only leverage is increased traffic, she will labor at Pinterest, Twitter, Facebook, and Google+, promoting her content and doing her best to gain more audience.

Perhaps she can double her traffic, and her monthly income might go from $75 to $150. That helps with the groceries, but it’s a terrible return on invested time. So what might Molly do? Well, if she can’t join a higher-paying network like FMP, she may well decide to abandon content creation all together. And when she stops investing in her own site, guess what happens? She’s not creating new content for Pinterest, Twitter, Facebook and Google to harvest, and she’s not using those platforms to distribute her content.

For the past seven years, it’s been FMP’s business to get people like Molly paid a lot more than 75 cents per thousand audience members. We’re proud of the hundred plus million dollars we’ve injected into the Independent web, but I have to be honest with you. There are way more Mollys in the world than FMP can help – at least under current industry conditions. And while we’ve innovated like crazy to create value beyond standard banners, it’s going to take more to insure content creators get paid appropriately. It’s time to think outside the box.

—-

Special thanks to folks who have been helping me think through this issue, including Deanna Brown and the FMP team, Randall Rothenberg of the IAB, Brian Monahan, Chas Edwards, Jeff Dachis, Brian Morrissey, and many, many more. 

 

Get Ready for Some Pictures, Folks

By - April 30, 2012

A wine we enjoyed last weekend.

I’ve become increasingly troubled by the “data traps” springing up all over AppWorld and the Internet, and while I’ve been pretty vocal about their downsides, I also use them quite a bit – especially for photos. That, I hope, is about to end.

However, I’m afraid it means you, dear reader, are going to be seeing a few more pictures of Mount Tamalpais and my favorite wines here on Searchblog.

Allow me to explain. I have done a pretty good job of partitioning my life digitally, posting utterances and stories that I’m happy to share with anyone on Twitter, leaving a few sparse comments and “Likes” on Facebook (I’m not a huge user of the service, I’ll be honest), and sending any number of photos to thousands of “followers” on Instagram and Tumblr.

The fact is, none of these services comprise what I call the Independent Web, as I describe it in this post: Put Your Taproot Into the Independent Web. And over time, it’s come to bother me that my content and my usage has been aggregated into a deal that feels out of balance. These companies are getting huge valuations (and exits) on the back of our collective usage (often with little or no revenue model). And what are we getting back? A free service. One that is constantly taking data from our interactions, and leveraging that data for ever higher valuations.

The Lobby of AT&T, where I visited last week

If you’re a professional content creator, as I am, there’s only so long you can go without feeling a bit…used.

I’d be OK with this tradeoff if these services made it easy to export my data outside of their walls, but so far, that’s not been the case. I’ve got hundreds of shots stuck on Twitpic, for example (and I know, you can runs some kind of script, but I’m not really going to figure out how to do that). And about that many on Instagram. Plus scores on Tumblr, which I used, briefly, as a kind of photo blog (the 500K image limit in email stopped that habit).

So as a way of putting my money where my mouth is, I’m going to start sending all photos that I care to share publicly to this site. WordPress has a new version of its app that promises to make photo uploads pretty easy from my phone (fingers are crossed, I haven’t used it yet). Consider the shots “Unicorn chasers,” if you will, respites between my half-baked predictions, long rants on identity, or musings on antiquities from the future. If the spirit moves me, I’ll then push those same photos to Tumblr or Instagram (or whatever comes next). At least this way, the photo “lives” on my site, and whatever initial pageviews and data is created stays on this site, where I can leverage it to support my work (IE, show ads next to them, and/or understand consumption in some way that helps me create a better site).

Mount Tamalpais from Bald Hill, Marin County - quite literally my backyard.

This approach, for example, will allow me to “pin” these photos to Pinterest, and any traffic from Pinterest will come back to this site, rather than Instagram or Tumblr.

Now, I can’t exactly replicate what Twitter and Facebook have created here on this blog, so I’ll continue to use those platforms as I have in the past. For me, I mostly use social services to point to things I think my “followers” may find interesting out there on the web. Going forward, that will include my public photos – on my own site.

I hope seeing the odd photo now and again – even if they’re a bit out of context – won’t turn you off as a reader. I figure I’ll only post shots that I’d be happy to send to Twitter anyway, where I have a very large and very vocal audience in any case. As always, tell me what you think….and forgive my technical lameness as I get started. I’m working out the kinks (anyone know how to make sure I get proper right margins on photos in WordPress, and stylized captions?!).

 

A Coachella “Fail-ble”: Do We Hold Spectrum in Common?

By - April 18, 2012

Neon Indian at Coachella last weekend.

 

Last weekend I had the distinct pleasure of taking two days off the grid and heading to a music festival called Coachella. Now, when I say “off the grid,” I mean time away from my normal work life (yes, I tend to work a bit on the weekends), and my normal family life (I usually reserve the balance of weekends for family, this was the first couple of days “alone” I’ve had in more than a year.)

What I most certainly did not want to be was off the information grid – the data lifeline that all of us so presumptively leverage through our digital devices. But for the entire time I was at the festival, unfortunately, that’s exactly what happened – to me, and to most of the 85,000 or so other people trying to use their smartphones while at the show.

I’m not writing this post to blame AT&T (my carrier), or Verizon, or the producers of Coachella, though each have some part to play in the failure that occurred last weekend (and most likely will occur again this weekend, when Coachella produces its second of two festival weekends). Rather, I’m deeply interested in how this story came about, why it matters, and what, if anything, can be done about it.

First, let’s set some assumptions. When tens of thousands of young people (the average age of a Coachella fan is in the mid to low 20s) gather in any one place in the United States, it’s a safe bet these things are true:

- Nearly everyone has a smartphone in their possession.

- Nearly everyone plans on using that smartphone to connect with friends at the show, as well as to record, share, and amplify the experience they are having while at the event.

- Nearly everyone knows that service at large events is awful, yet they hope their phone will work, at least some of the time. Perhaps a cash-rich sponsor will pay to bring in extra bandwidth, or maybe the promoter will spring for it out of the profit from ticket sales. Regardless, they expect some service delays, and plan on using low-bandwidth texting services more than they’d like to.

- Nearly everyone leaves a show like Coachella unhappy with their service provider, and unable to truly express themselves in ways they wished they could. Those ways might include, in no particular order: Communicating with friends so as to meet up (“See you at the Outdoor stage, right side middle, for Grace Potter!”), tweeting or Facebooking a message to followers (“Neon Indian is killing it right now!”), checking in on Foursquare or any other location service so as to gain value in a social game (or in my case, to create digital breadcrumbs to remind me who I was once in hit dotage), uploading photos to any number of social photo services like Instagram, or using new, music-specific apps like TastemakerX on a whim (“I’d like to buy 100 shares of Yuck, those guys just blew me away!”). Oh, and it’d be nice to make a phone call home if you need to.

But for the most part, I and all my friends were unable to do any of these things at Coachella last weekend, at least not in real time. I felt as if I was drinking from a very thin, very clogged cocktail straw. Data service was simply non existent onsite. Texts came in, but more often than not they were timeshifted: I’d get ten texts delivered some 20 minutes after they were sent. And phone service was about as good as it is on Sand Hill Road – spotty, prone to drops, and often just not available. I did manage to get some data service while at the show, but that was because I found a press tent and logged onto the local wifi network there, or I “tricked” my phone into thinking it was logging onto the network for the first time (by turning “airplane mode” off and on over and over again).

This all left me wondering – what if? What if there was an open pipe, both up and down, that could handle all that traffic? What if everyone who came to the show knew that pipe would be open, and work? What kind of value would have been created had that been the case? How much more data would have populated the world, how much richer would literally millions of people’s lives been for seeing the joyful expressions of their friends as they engaged in a wonderful experience? How much more learning might have countless startups gathered, had they been able to truly capture the real time intentions of their customers at such an event?

In short, how much have we lost as a society because we’ve failed to solve our own bandwidth problems?

I know, it’s just a rock festival, and jeez Battelle, shut off your phone and just dance, right? OK, I get that, I trust me, I did dance, a lot. But I also like to take a minute here or there to connect to the people I love, or who follow me, and share with them my passions and my excitement. We are becoming a digital society, to pretend otherwise is to ignore reality. And with very few exceptions, it was just not possible to intermingle the digital and the physical at Coachella. (I did hear reports that folks with Verizon were having better luck, but that probably because there were fewer Verizon iPhones than those with AT&T. And think about that language – “luck”?!).

Way back in 2008, when the iPhone was new and Instagram was a gleam in Kevin Systrom’s eye, I was involved in creating a service called CrowdFire. It was a way for fans at a festival (the first was Outside Lands) to share photos, tweets, and texts in a location and event specific way. I’ve always rued our decision to not spin CrowdFire out as a separate company, but regardless, my main memory of the service was how crippled it was due to bandwidth failure. It was actually better than Coachella, but not by much. So in four years, we’ve managed to go backwards when it comes to this problem.

Of course, the amount of data we’re using has exploded, so credit to the carriers for doing their best to keep up. But can they get to the promised land? I wonder, at least under the current system of economic incentives we’ve adopted in the United States. Sure, there will always be traffic jams, but have we really thought through the best approach to how we execute “the Internet in the sky?”

Put another way, do we not hold the ability to share who we are, our very digital reflections, as a commons to which all of us should have equal access?

As I was driving to the festival last Saturday, I engaged in a conversation with one of my fellow passengers about this subject. What do we, as a society, hold in commons, and where do digital services fit in, if at all?

Well, we were driving to Coachella on city roads, held in commons through municipalities, for one. And we then got on Interstate 10 for a few miles, which is held in commons by federal agencies in conjunction with local governments. So it’s pretty clear we have, as a society, made the decision that the infrastructure for the transport of atoms – whether they be cars and the humans in them, or trucks and the commercial goods within them – is held in a public commons.Sure, we hit some traffic, but it wasn’t that bad, and there were ways to route around it.

What else do we hold in a commons? We ticked off the list of stuff upon we depend – the transportation of water and power to our homes and our businesses, for example. Those certainly are (mostly) held in the public commons as well.

So it’s pretty clear that over the course of time, we’ve decided that when it comes to moving ourselves around, and making sure we have power and water, we’re OK with the government managing the infrastructure. But what of bits? What of “ourselves” as expressed digitally?

For the “hardwired” Internet – the place that gave us the Web, Google, Facebook, et al, we built upon what was arguably a publicly common infrastructure. Thanks to government and social normative regulation, the hard-wired Internet was architected to be open to all, with a commercial imperative that insured bandwidth issues were addressed in a reasonable fashion (Cisco, Comcast, etc.).

But with wireless, we’ve taken what is a public asset – radio spectrum – and we’ve licensed it to private companies under a thicket of regulatory oversight. And without laying blame – there’s probably plenty of it to go around – we’ve proceeded to make a mess of it. What we have here, it seems to me, is a failure. Is it a market failure – which usual preceeds government action? I’m not sure that’s the case. But it’s a fail, nevertheless. I’d like to get smarter on this issue, even though the prospect of it makes my head hurt.

As I wrote yesterday, I recently spent some time in Washington DC, and sat down with the Obama administration’s point person on that question, FCC Chair Julius Genachowski. As I expected, the issue of spectrum allocation is extraordinarily complicated, and it’s unlikely we’ll find a way out of the “Coachella Fail-ble” anytime soon. But there is hope. Technological disruption is one way – watch the “white spaces,” for instance. And in a world where marketing claims to be “the fastest” spur customer switching, our carriers are madly scrambling to upgrade their networks. Yet in the US, wireless speeds are far below those of countries in Europe and Asia.

I plan on finding out more as I report, but I may as well ask you, my smarter readers: Why is this the case? And does it have anything to do with what those other countries consider to be held in “digital commons”?

I’ll readily admit I’m simply a journeyman asking questions here, not a firebrand looking to lay blame. I understand this is a complicated topic, but it’s one for which I’d love your input and guidance.

What Doesn’t the Valley Understand About Washington?

By - April 17, 2012

A few weeks ago I ventured to our nation’s capital to steep in its culture a bit, and get some first hand reporting done for the book. I met with about a dozen or so folks, including several scholars, the heads of the FCC and FTC, and senior folks in the Departments of Commerce and State. I also spoke to a lobbyist from the Internet industry, as well as people from various “think tanks” that populate the city. It was my first such trip, but it certainly won’t be my last.

Each of the conversations was specific to the person I was interviewing, but I did employ one device to tie them together – I asked each person the same set of questions toward the end of the conversation. And as I was on the plane home, I wrote myself a little reminder to post about the most interesting set of answers I got, which was to this simple question: What doesn’t the Valley understand about Washington?

It’s not a secret that the Valley, as a whole, has an ambivalent attitude toward DC. Until recently, the prevailing philosophy has trended libertarian – just stay out of the way, please, and let us do what we do best. Just about every startup CEO I’ve ever known – including myself – ignores Washington in the early years of a company’s lifecycle. Government is treated like plumbing – it’s dirty, it costs too much, it’s preferably someone else’s job, and it’s ignored until it stops working the way we want it to.

SOPA and PIPA is the classic example of the plumbing going out – and the Internet’s response to it was the topic of much of my conversations last month. Sure, “we” managed to stop some stupid legislation from passing, but the fact is, we almost missed it, and Lord knows what else we’re missing due to our refusal to truly engage with the instrument of our shared governance.

To be fair, in the past few years a number of major Internet companies have gotten very serious about joining the conversation in DC – Google is perhaps the most serious of them all (I’m not counting Micrsoft, which got pretty serious back in 1997 when it lost an antitrust suit). Now, one can argue that like Microsoft before it, Google’s seriousness is due to how interested Washington has become in Google, but regardless, it was interesting to hear from source after source how they respected Google for at least fully staffing a presence in DC.

Other large Internet companies also have offices in Washington, but from what I hear, they are not that effective beyond very narrow areas of interest. Two of the largest e-commerce companies in the world have a sum total of eight people in DC, I was told by a well-placed source. Eight people can’t get much done when you’re dealing with regulatory frameworks around fraud, intellectual property, international trade, infrastructure and spectrum policy, and countless other areas of regulation that matter to the Internet.

In short, and perhaps predictably, nearly everyone I spoke to in Washington told me that the Valley’s number one issue was its lack of engagement with the government. But the answers were far more varied and interesting than that simple statement. Here they are, without attribution, as most of my conversations were on background pending clearance of actual quotes for the book:

- The Valley doesn’t understand the threat that comes from Washington. Put another way, our industry figures it out too late. The Valley doesn’t understand how much skin it already has in the game. “When things are bent in the right direction here, it can be a really good thing,” one highly placed government source told me. Washington is “dismissed, and when it’s dismissed you neither realize the upside nor mitigate the downside.”

- When the Valley does engage, it’s too lightly, and too predictably. Larger Valley companies get an office on K Street (where the lobbyists live) and hire an ex-Congressperson to lobby on that company’s core issues. But “that’s not where the magic is,” one source told me. The real magic is for companies to use their own platforms to engage with their customers in authentic conversations that get the attention of lawmakers. This happened – albeit very late – with SOPA/PIPA, and it got everyone’s attention in Washington. Imagine if this was an ongoing conversation, and not a one-off “Chicken Little” scenario?  Counter to what many believe about Washington, where money and lobbying connections are presumed to always win the day, “Fact-based arguments matter, a lot,” one senior policymaker told me. “Fact-based debates occur here, every day. If you take yourself out of that conversation, it’s like going into litigation without a lawyer.” Internet companies are uniquely positioned to change the approach to how lawmakers “hear” their constituents, but have done very little to actually leverage that fact.

- The Valley is too obsessed with the issue of privacy, one scholar told me. Instead, it should look to regulations around whether or not harm is being done to consumers. This was an interesting insight – and perhaps a way to think about protecting our data and our identities. There are already a thicket of regulations and law around keeping consumers safe from the harmful effects of business practices. Perhaps we are paying attention to the wrong thing, this scholar suggested.

- The Valley assumes that bad legislation will be rooted out and defeated in the same way that SOPA and PIPA were. But that’s a faulty assumption. “The Valley is techno-deterministic, and presumes ‘we can engineer around it,’” one scholar told me. “They don’t realize they’ve already been blinkered – a subset of possible new technological possibilities has already been removed that they are not even aware of.” One example of this is the recent “white spaces” spectrum allocation, which while promising avenues of new market opportunity, was severely retarded by forces in Washington far more powerful than the Internet industry (more on this in another post).

- The framework of “us vs. them” is unproductive and produces poor results. The prevailing mentality in the valley, one well-connected scholar told me, is the “heroic techie versus the wicked regulator…Rather than just having libertarian abstractions about regulations versus freedom,” this source continued,  “it’s important to realize that in every single debate there are… regulations that strike better or worse balances between competing values. You just have to engage enough to defend the good ones.”

Put another way, as another senior government official told me, “The Valley doesn’t understand there are good and decent people here who really want to get things done.”

If I were to sum up the message from all my conversations in Washington, it’d be this: We’re here because as a society, we decided we needed people to help manage values we hold in common. Increasingly, the Internet is how we express those values. So stop ignoring us and hoping we’ll go away, and start engaging with us more. Decidedly better results will occur if you do.

I don’t pretend that one trip to DC makes me an expert on the subject (it surely does not), but I left DC energized and wanting to engage more than I have in the past. I hope you’ll feel the same.

(image: traveldk.com)

On Larry Page’s Letter: Super Amazing Great Tremendous!

By - April 09, 2012

(I promised a bit more color commentary on Larry Page’s 3500-word missive posted last week, and after reading it over a few more times, it seems worth the time to keep that promise. I wrote this last weekend, but am on vacation, so just posting it now…)

It’s not often you get a document such as this to analyze – the last time I can recall is Google’s feisty 2004 letter to shareholders written on the eve of its IPO.

Well, eight years in, the feisty has taken a back seat to the practical, the explicative, and the … nice! The first thing I noticed were the exclamation points – Larry uses one in the second sentence, then keeps on exclaiming – 11 times, in fact. Now, I don’t know Larry Page very well, but he just doesn’t seem the type to use exclamation points. Seeing so many of them felt….off. Also, the letter had a very “softer side of Sears” feel to it, the language itself was rounded, not quite defensive (as it might have been given the news lately), but also not pointed.

Clearly, this was a new Larry – Larry in a sweater vest, so to speak. As a lover of language, I wanted to see if there were any interesting patterns, so for ease of analysis, I decided to cut and paste it into a Word doc (sorry, Google Docs, old habits die hard. Something that the Bing team knows well…).

Larry uses variations of the word “love” eight times in his post. Beautiful is used three times. “Great” gets a workout: it’s used 14 times. “Excited about” gets five. “You can,” 10, “We have,” 12. “Search” gets 22 mentions, “Google,” 32, “people,” 28.  “Users” gets 18 – I’ve always hated that word. Android is mentioned 13 times, though it doesn’t seem to be nearly as important in the document as Google+, which merits 9 mentions, slightly lower than “revenue,” which comes in at 10.

But what really strikes me is how, well, nice the language is. So many nice words – beautiful, share, improve, healthy, better, like, important, great, well, tremendous, believe, enable, best – all of these words are used at least three times, often more than ten.

I’m not saying it’s wrong to be so darn nice, it just doesn’t feel like it’s truly Page’s voice. It feels more written by committee. It lacks the zest and attitude of Page’s 2004 missive – but then again, Google has a lot more on its plate now, and a lot more to lose.

Then again, there are some zingers in there, even if they are wearing sweaters. Page makes a point of showing how the Android and YouTube acquisitions worked out in the end, a veiled (or vested?!) defense of Google’s Motorola deal. And while the word “evil” is only used once, I find it very, very interesting it was used at all. For a while, it seemed Google was backing off its unofficial slogan of “Don’t be evil.” But in the letter, up it pops, though again, with its shoulders rounded: “We have always believed that it’s possible to make money without being evil,” Page writes. Then he goes into an anecdote about why revenue is necessary, starring his tragic hero Nikola Tesla.

Oddly, for a letter that is reputedly written for investors, Page never mentions Google’s stock price, which hasn’t exactly beaten the Nasdaq lately, but it hasn’t lagged, either.

In the end, the letter is a long, rambling walk through a familiar suburb. Nice, but…well, just that, nice. Maybe I was hoping that Page would come out swinging, defending Google against all the recent slings and arrows, pointedly explaining why it makes sense to combine privacy policies, integrate Google+ into search, and buy Motorola. But that’s clearly not his (public) style. I’m guessing in private, there’s a bit more fire in his pen.