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The InterDependent Web

By - January 23, 2011

When I wrote Identity and The Independent Web last Fall, I was sketching out the beginnings of what I sense was an important distinction in how we consume the web. This distinction turned on one simple concept: Dependency.

Of course, the post itself was nearly 2500 words in length and wandered into all sorts of poorly lit alleys, so one could be forgiven for not easily drawing that conclusion. But since that Thinking Out Loud session, I’ve continued to ponder this distinction, and I’ve found it’s become a quite useful framing tool for understanding the web.

So here’s another attempt at defining one corner of the “Independent Web,” as distinct from the “Dependent Web.” In my original piece, I state:

The Dependent Web is dominated by companies that deliver services, content and advertising based on who that service believes you to be: What you see on these sites “depends” on their proprietary model of your identity, including what you’ve done in the past, what you’re doing right now, what “cohorts” you might fall into based on third- or first-party data and algorithms, and any number of other robust signals.

The Independent Web, for the most part, does not shift its content or services based on who you are.

Yahoo, for example, will show you one of a possible 38,000 home pages, depending on who Yahoo believes you to be. Yahoo Mail (or any other mail, for that matter), is an utterly dependent service: it will only show you your mail (we hope). Facebook, of course, creates an entirely different experience for you than it does for me, because what Facebook shows us depends on who Facebook thinks we are. And search, in general, is a dependent service – what you see as results depends both on what you input as a query, as well as who the search service believes you are (personalized search).

And while I believe this idea of a dependent service being defined as “one that changes depending on its profile of you” is important, this isn’t the only feature that distinguishes Independent sites from Dependent ones.

Another way to understand the distinction is that Dependent sites tend to be ones we, well, depend on for some basic service in our lives. You might depend on Yahoo or Google for mail. We depend on Facebook for our social graph, and Twitter for our “interest graph.” Of course we depend on Google (or Bing) for search. And I’m starting to depend on StumbleUpon to surface sites I might like.

In fact, most of us “depend” on Dependent-web services to discover independent sites – a fact we may as well call “the interdependence of the independent and dependent web.”

Whew. We employ both kinds of sites, and each type depends on the other for value. What would Google be without the billion points of independent light out the rest of the web?

Not much, to my mind, and I think that’s essentially the point of both Fred’s call out today (see his piece on The Independent Web) as well as his partner Albert’s advice to Larry Page.

The funny thing is, Dependent web sites crave the dollars that big marketers spend on branding, but their services don’t complement brands, in the main. Yet up until recently, brands haven’t have many other places to spend their dollars online (brands love scale), so they’ve spent them at large dependent web services, and, in the main, bemoaned their comparative weakness to television. Yahoo Mail is a famously terrible place to put brand advertising. Google is a direct marketing machine, but it’s not a great environment for brands. Brands love Twitter and Facebook, but are still trying to figure out how to leverage those services at scale – Facebook’s “engagement ads” are not exactly brand friendly, though they can serve as great distribution for a branded story somewhere else (same for Twitter’s promoted services).

So where does that brand story live? My answer: On the Independent web.

Consider the sub-category of “content” on the web. It’s a very large part of what makes the web, the web – millions of “content sites,” ranging from the smallest blog to ESPN.com. Most of these sites don’t change what they show us depending on who they think we are. So does the “independent/dependent/interdependent” framework help us distinguish anything interesting here?

I think it does. To me, an independent content site is one driven by a sense of shared passion around a subject or a voice, one that a consumer independently chooses to visit and engage with.

Publishers pay close attention to what visitors choose to do independently on our sites – we covet “repeat visitors,” “high engagement,” and “low bounce rates.” Do visitors come back independently, or do we, as publishers, depend on acquiring one-time traffic from SEO, SMO, or other “tricks”? Once visitors come via a dependent service like search or social or StumbleUpon, do they independently elect to consume more than just the one page they’ve landed on?

When it comes to “engagement”, dependent sites tend to have more of it, at least if you are measuring in user minutes. Folks stay on Facebook for a long, long time. Twitter users go back over and over again, especially power users. The average Google user goes back again and again. Most of Yahoo’s engagement is in mail – take mail out of Yahoo, and Yahoo would lose a huge chunk of its user minutes.

But there’s a big difference between engagement on a dependent site, and engagement on an independent site. And in a word, that difference is what makes a brand.

When we engage with content, we engage with a shared narrative – a new story is told, an old story is retold or re-interpreted. And that shared narrative shifts what we believe and how we see the world. We are in the space of shared symbols – brands – and it is in this space that marketers can tell their stories and shift our perceptions.

I’m fascinated by how brands can leverage Dependent services in conjunction with the Independent web, and if there’s one conclusion I’ve come to, it’s this: Brands must be robust actors in the Independent web, underwriting its ecosystem and participating in its ongoing creation and curation. It’s not enough to “have a presence in Facebook” or “do an upfront with Yahoo and Google.” Brands must also engage where ideas and narratives are born and shaped – and learn to join the Independent web.

Sure, that idea is self-serving – FM’s tagline is “powering the best of the Independent web, at scale.” But that doesn’t mean we don’t love us some Dependent web services. We’ve been pioneers in working with all kinds of great services, from Digg in 2006 to Facebook Platform in 2007; Twitter in 2008 to Foursquare in 2010. If you’re going to succeed as a publisher or a brand on the web, you need to work with both. They’re interdependent, and wonderfully so.

Some might argue that you never need to leave a particular service or domain – that you can “get all you need” in one place. I certainly hope not. That sounds like a movie we’ve seen before, and don’t need to watch again.

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Me On Google Change

By - January 21, 2011

I did a short bit on Bloomberg (they have some amazing studios in SF on the water, had not been there, good to see my old pal Cory, who is now working there). Here’s the video:

Whoa!!! Larry Page To Take Over As Google CEO

By - January 20, 2011

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This just in…via WSJ:

Google Inc. said co-founder Larry Page will replace Eric Schmidt as chief executive, a surprise change atop the Internet giant.

Mr. Page will take charge of day-to-day operations as CEO starting April 4. Mr. Schmidt will become executive chairman of the company, focusing externally on partnerships and government outreach.

Moments after Google announced the change, Mr. Schmidt sent a message to his Twitter followers saying, “Day-to-day adult supervision no longer needed!”

Here’s the tweet.

Old timers will recall Larry ran Google before the founders brought in Eric back in 2001. Wow. More on this as it develops.

Update: Here’s Eric’s post announcing the change. From it:

For the last 10 years, we have all been equally involved in making decisions. This triumvirate approach has real benefits in terms of shared wisdom, and we will continue to discuss the big decisions among the three of us. But we have also agreed to clarify our individual roles so there’s clear responsibility and accountability at the top of the company.

Larry will now lead product development and technology strategy, his greatest strengths, and starting from April 4 he will take charge of our day-to-day operations as Google’s Chief Executive Officer. In this new role I know he will merge Google’s technology and business vision brilliantly. I am enormously proud of my last decade as CEO, and I am certain that the next 10 years under Larry will be even better! Larry, in my clear opinion, is ready to lead.

Sergey has decided to devote his time and energy to strategic projects, in particular working on new products. His title will be Co-Founder. He’s an innovator and entrepreneur to the core, and this role suits him perfectly.

As Executive Chairman, I will focus wherever I can add the greatest value: externally, on the deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership that are increasingly important given Google’s global reach; and internally as an advisor to Larry and Sergey….

… We are confident that this focus will serve Google and our users well in the future. Larry, Sergey and I have worked exceptionally closely together for over a decade—and we anticipate working together for a long time to come. As friends, co-workers and computer scientists we have a lot in common, most important of all a profound belief in the potential for technology to make the world a better place.

And here’s live coverage of the earnings conference call, where the three are talking about the changes.

So what does it all mean? Well, I have to say that upon reflection, I’m not all that surprised. Eric has been at it for a decade, a very long time to be running a company, particularly one that has very headstrong founders in key positions of power. It’s quite interesting that Google did not look outside its ranks for a new CEO, instead doubling down on one of its original founders. I think it’s fair to say that Larry Page will not be a conventional CEO – he’s not been much of a public figure for the past ten years – Sergey is the more gregarious and press friendly of the two. It will be interesting to see if that changes, or if Page chafes at the relentless public demands of running a massively scrutinized public company.

It certainly makes for an interesting comparison to Google’s two other main rivals – Facebook and Apple. CEO questions have loomed large for both those companies – Apple’s Steve Jobs recently took a third leave of absence for health related reasons, and many have questioned whether Facebook CEO Mark Zuckerberg was mature enough to handle the job of leading a high-flying public company.

But all three companies have the DNA of being founder- and product-driven entities. With this move, Google is confirming what many already knew, and preparing for the battle ahead.

Does Google Favor Its Own Services?

By - January 19, 2011

Seems so. I’ve written about this a lot, so much that I won’t bother to link to all the stuff I’ve posted. It was the basis of a chapter in the book, where I pointed out that (at the time) Google claimed algorithmic innocence, and Yahoo, on the other hand, was cheerful in its presumption that Yahoo services were the best answer to certain high value searches (like “mail”).

Now comes this study, from Harvard professors no less, which pretty much states the obvious. Check this graph:

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It’s clear that in some cases, one might argue that Google services should win (maps, for example). But for “chat”? Or for “mail”? A stretch.

Here’s the paper’s authors general conclusion: “Google typically claims that its results are “algorithmically-generated”, “objective”, and “never manipulated.” Google asks the public to believe that algorithms rule, and that no bias results from its partnerships, growth aspirations, or related services. We are skeptical.”

So am I.

Update: Danny has, as always, a more nuanced point of view. Thanks, my always smarter commentators.

Make My Baby – Is The Baby Facebook? Updated: No, It's Myspace…

By - January 18, 2011

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Over the weekend, as I pondered an eMarketer report estimating Facebook’s advertising revenue at $1.86 billion (seems low), I wondered to myself: When will Facebook start to drive the kind of widespread graymarket activity which proved Google’s immense worth? Or will it ever?

Allow me to explain. Back in the days when Google and its rival Overture were on the rise (this would be pre-IPO for Google, so around 2002-3), an army of small time arbitragers were gathering, leveraging Adwords (and in 2003, Adsense) to make money in any number of ways. But the basics were pretty easy to grok: Say you could purchase a click on Adwords for the term “cute kitty” for fifty cents. And say further that when someone clicked on your Adword, they’d show up at a third-party site, and 10 percent of the time, they’d follow instructions to fill out a mortgage application. And say that further, you could sell that filled-out application to a lender for $15.

If you do the math – ten clicks costs you $5 on Adwords, but you make $15 for selling that lead, which converts one in ten times – it explains why a huge business sprang up around Adwords and Adsense. If you are paying attention, redirecting attention from cute kitties to mortgage brokers will pay extremely well. The same proved true for all manners of lead generation, from cel phone plans to life insurance to automobiles.

It’s legal, but it leaves a kind of queasy feeling in your stomach, don’t it?

Now, just that feeling has risen up around Facebook advertising in the past (in particular around social gaming), but I was waiting for it to break out full blown into the “real world” outside of Internet ponziland. When would Facebook become a hotbed of affiliate arbitrage across the board? To me, that would be a sign that Facebook was breaking out just like Google did in 2003.

So it’s funny how this story from RWW breaks just this weekend. And funnier still how it’s all about Google’s competitor, Bing, which has changed the economics of the Internet advertising ecosystem by pricing conversions well above previous floors. It’s all just too rich. Literally. (Google’s Matt Cutts points this out in his own way right here).

The details: RWW found the fact that a random website called “Make-My-Baby.com” was the third largest advertiser on Facebook in Q3 2010. Turns out, it’s an affiliate play driven by Microsoft Bing bounty money. In short, Microsoft offers a certain amount of money, per user, to anyone who can convert that user into a Bing customer. The company behind Make My Baby, Zugo, seems to be a vintage arbitrageur. In fact, Zugo hasn’t even updated its terms and conditions, which date back to 2009 and seem cut and pasted from a program they ran in England doing for Ask.com that they are now doing for Bing.

Clearly, Zugo has found that buying ads on Facebook pays well. The question remains, however, whether that is true for a whole new class of arbitrageur.

Ah, me loves me some Interwebs.

Update: Bing has terminated its relationship with Zugo, SEL reports. And Zugo was using MySpace inventory, NOT Facebook….

The Signal Weekly: 1.14.2011

By - January 14, 2011

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Most of you know by now that I do a short summary of the day’s news over on the FM Blog. This year I’m going to try to do a Friday summary of the week’s Signals here on Searchblog. Here’s the first of the year:

Monday Signal: The CES-less Hangover

Tuesday Signal: Murdoch and Jobs and Verizon, Oh My!

Weds. Signal: Do We Have a Quora Yet?

Thursday Signal: Internet By the Numbers

Friday Signal: Enjoy You Some Weird.

If you want Signal each day, sign up for the email newsletter on the site (top right), or grab the RSS Feed.

Have a great weekend!

No, In Fact, We Haven't Seen This Movie Before

By - January 13, 2011

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Thanks to monster private financings from Groupon and Facebook, as well as the promise of major IPOs from Demand, LinkedIn, Zynga and others, the predictable “watch out, here we go again” buzz is rising up in the press. This article from Ad Age, subtitled “With Billion-Dollar Dot-com Valuations Back in a Big Way, It’s Time for Alarm Bells to Start Ringing,” is typical of the bunch. With a “we’ve seen this movie before” tone, it points out that most of the successful companies of today had models that were tried ten years ago, and in the main they failed.

But I’d like to point out a couple pretty obvious differences between the dot com busts of a decade ago, and the companies that are now earning billion dollar valuations. To wit:

- Each of the companies earning these valuations have revenues in the hundreds of millions or more, and operating profits in the tens of millions, if not more. Most also have operating histories of many years, and/or executives and boards who have extensive histories operating in the Internet economy.

- The markets overall have changed dramatically, on many different fronts. First of all, nearly every consumer in the developed world is comfortable spending money using the web. Second, the web is firmly a mobile medium, enabling business models that were mere dreams a decade ago. And third, the markets have been mostly closed to public investment in the “Internet thesis” for most of the past ten years, so there is a very strong pent up demand to invest in what many see as the future of how business will be done.

Combine these factors and you have what I view as a pretty solid environment: a strong demand for quality companies, and quality companies to fulfill that demand. Is $50 billion too high for Facebook, or $5billion too high for Groupon? Well, we’ll see. As the initial surge of IPO demand abates, newly public companies will prove their value in the long term by delivering growth. At least they have strong platforms of revenues and profits, as well as extraordinary market positions, from which to start. Remember, Google went public in 2004 at under $100, and nearly everyone thought the company was overvalued.

Back in the dot com era, most retail Internet investors were buying on the come, on promises that the hand waving and affirmations of Web 1.0 entrepreneurs would magically come true. Almost none of the companies that went public back then could boast the metrics today’s private winners do. Truth be told, the promises of the Internet hand wavers are coming true, but for investors in the 1990s, it’s a decade too late.

We’re in an entirely different place, as an industry, than we were ten years ago. I very much doubt we’ll see the same mistakes made again. If money losing companies with nothing but an idea and some VC backers manage to go public, I’ll be the first to write a post about our collective amnesia.

And this is not to say that marginal companies won’t attempt to go public in coming years, or that there won’t be flameouts and losers over time. There always are. But compared to the late 1990s, the companies lining up to offer themselves to the public look healthy, well positioned, and very, very real.

Yahoo IPO vs. Facebook IPO

By - January 10, 2011

From Paid Content, a tale of two very different eras:

Yahoo In 1996

Age: 1 year

Annual sales: $1.3 million

Net loss: $0.6 million

Total raised in IPO: $33.8 million

Market value at close: $848 million

Employees: 49

Facebook In 2012

Age: 8 years

Annual sales: $1.2 billion-plus

Net income: $355 million-plus (2010 estimates)

Last valuation: $50 billion

Employees: 2,000-plus

What Everyone Seems to Miss In Facebook's Private or Public Debate…

By - January 04, 2011

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…is the core reason it makes sense for Facebook to be public: Accountability to its customers. The rest of this debate is simply financial folks arguing amongst themselves.

Facebook is the greatest repository of data about people’s intentions, relationships, and utterances that ever has been created. Period. And a company that owns that much private data should be accountable to the public. The public should be able to review its practices, its financials, and question its intentions in a manner backed by our collective and legally codified will. That’s the point of a public company – accountability, transparency, and thorough reporting.

If Facebook wants to stay private and not be part of the social mores which we’ve built that govern major corporations (flawed though they may be), well I think that would be a major strategic blunder, one that would ultimately doom the company. It’s fine for all sorts of companies to stay private, for all sorts of reasons. But a company like Facebook, with its unprecedented grasp of our social data, should be accountable to the public. If it isn’t, we’ll migrate our “social graphs” to a company that is.

If Zuckerberg doesn’t want to be a public CEO and deal with the realities of that, as this Reuters piece argues, well, he should find a CEO who is willing to do the job.

(If you’re not up on the debate, here’s a primer.)

Predictions 2011

By - January 03, 2011

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InnostraD-tm-3-tm-tm-tm.jpg the eighth version of my annual predictions, I’ll try to stay focused and clear, the better to score myself a year from now. And while I used the past two weeks of relatively fallow holiday time as a sort of marination period, the truth is I pretty much just sat down and banged these predictions out in one go, just as I have the past seven years. It works for me, and I hope you agree, or at least find them worth your time. So here we go:

1. We’ll see the rise of a meme which I’ll call “The Web Reborn” – a response to the idea that mobile and apps have killed the web as we know it. In fact, we’ll come to realize that the web is the foundation of nearly everything we do, and we’ll start to expect, as consumers, that all our service providers honor and build in basic principles of “web friendliness” – data portability and user-controlled identity most important among them. Call it a return to the original principles of “Web 2.0″.

2. Voice will become a critical interface for computing (especially mobile apps). This is just not true now, but in a year’s time, there will be a handful of very popular apps that are driven by voice, and in particular, by weaving together voice, text, and identity.

3. DSPs (Demand Side Platforms) will fade into the fabric of larger marketing platforms. In the end, DSPs are the handle by which we understand the concept of technology-driven ad networks. And those have been with us for over a decade. Exchanges, DSPs, SSPs, etc. are all important, but in the end, what matters is that advertisers have scale and efficiency, and consumers have control.

4. Related, MediaBank will emerge as a major independent player in the marketing world, playing off its cross channel reach (outside of digital) and providing an alternative to the conflicted digital platforms at Facebook, Microsoft, Google, and Yahoo. I could imagine a major tech or telco player trying to buy MediaBank as the world realizes that marketing is, in essence, a massive IT business (among many other things).

5. The Mac App Store will be a big hit, at least among Mac users, and may well propel Mac sales beyond expectations.

6. Related, Apple will attempt to get better at social networking, fail, and cut a deal with Facebook.

7. Also related, Apple will begin to show signs of the same problems that plagued Microsoft in the mid 90s, and Google in the past few years: Getting too big, too full of themselves, and too focused on their own prior success.

8. Microsoft will have a major change in leadership. I am not predicting Ballmer will leave, but I think he and the company will most likely bring in very senior new talent to open new markets or shift direction in important current markets like media/marketing/social.

9. The public markets will be surprisingly open to major new Internet deals, despite the current rise of “private IPOs” and the growing belief that the IPO process is broken. In the end, there’s just too many good reasons for public companies to be, well, public. (See Gurley).

10. The tablet market will have a year of incoherence. Apple will dominate with the iPad due to a lack of an alternative touchstone. Google will focus on providing a clear, consistent experience through Android for tablets and mobile, but it will take a third party to unify the experience. I don’t see that happening this year.

11. “Social deals” will morph to become a standard marketing outlet for all business, and by year’s end be seen as a standard part of any marketer’s media mix. Groupon will lead here, but nearly every major player will have an offering, often by partnering with leaders. I’m tempted to say Facebook will abandon its own Deals offering for a deal with Groupon, but I’m not sure that will unfold in one year.

12. Related, Groupon will fend off an acquisition by a major carrier, probably AT&T or Verizon. It’s possible they’ll sell, but I doubt it.

13. Facebook will decline as a force in the Internet world, as measured by buzz. The company will continue to be seen as Big Brother in the press, and struggle with internal issues related to growth. Also, it will lose some attention/share to upstarts. However, its share of marketing dollars and reach will increase.

14. Related, we’ll see major privacy related legislation in the US brought to the floor of Congress, and then fail for lack of consensus. But that will drive a significant shift in how our culture understands its relationship to the world our industry is building, and that’s a good thing.

I’d love to keep going, but I think those are the major ones, at least from my vantage point. Thanks for reading, it was a great year. I’m not going to make predictions about my own work this year, as I’ve got too much inside knowledge on that topic! Let me know your thoughts in comments, and have a great 2011!

Related:


Predictions 2010

2010 How I Did

2009 Predictions

2009 How I Did

2008 Predictions

2008 How I Did

2007 Predictions