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On Small, Intimate Data

By - May 29, 2012

Part of the research I am doing for the book involves trying to get my head around the concept of “Big Data,” given the premise that we are in a fundamental shift to a digitally driven society. Big data, as you all know, is super hot – Facebook derives its value because of all that big data it has on you and me, Google is probably the original consumer-facing big data company (though Amazon might take issue with that), Microsoft is betting the farm on data in the cloud, Splunk just had a hot IPO because it’s a Big Data play, and so on.

But I’m starting to wonder if Big Data is the right metaphor for all of us as we continue this journey toward a digitally enhanced future. It feels so – impersonal – Big Data is something that is done to us or without regard for us as individuals. We need a metaphor that is more about the person, and less about the machine. At the very least, it should start with us, no?

Elsewhere I’ve written about the intersection of data and the platform for that data – expect a lot more from me on this subject in the future. But in short, I am unconvinced that the current architecture we’ve adopted is ideal – where all “our” data, along with the data created by that data’s co-mingling with other data – lives in “cloud” platforms controlled by large corporations whose terms and values we may or may not agree with (or even pay attention to, though some interesting folks are starting to). And the grammar and vocabulary now seeping into our culture is equally mundane and bereft of the subject’s true potential – the creation, sharing and intermingling of data is perhaps the most important development of our generation, in terms of potential good it can create in the world.

At Web 2 last year a significant theme arose around the idea of “You Are the Platform,” driven by people and companies like Chris Poole, Mozilla, Singly, and many others. I think this is an under-appreciated and important idea for our industry, and it centers around, to torture a phrase, the idea of “small” rather than Big Data. To me, small means limited, intimate, and actionable by individuals. It’s small in the same sense that the original web was “small pieces loosely joined” (and the web itself was “big.”)  It’s intimate in that it’s data that matters a lot to each of us, and that we share with much the same kind of social parameters that might constrain a story at an intimate dinner gathering, or a presentation at a business meeting. And should we choose to share a small amount of intimate data with “the cloud,” it’s important that the cloud understand the nature of that data as distinct from its masses of “Big Data.”

An undeveloped idea, to be sure, but I wanted to sketch this out today before I leave for a week of travel.

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Facebook’s Real Question: What’s the “Native Model”?

By - May 23, 2012

 

The headlines about Facebook’s IPO – along with questions about its business model – are now officially cringeworthy. It’s an ongoing, rolling study in how society digests important news about our industry, and it’s far from played out. But we seem at an interesting tipping point in perception, and now seemed a good time to weigh in with a few words on the subject.

Prior to Facebook’s IPO, I drafted a post about its core business model (targeted display advertising), but decided not to publish it. The main thrust of my post is below, but I want to explain why I didn’t post right away, and provide you all with something of a “tick tock” of what’s happened over the past few days.

The truth is, I didn’t post last week because I didn’t feel like piling on to what was becoming a media frenzy. Less than 24 hours before the biggest Internet IPO in history, the negative stories questioning Facebook’s core revenue model were coming fast and furious. My piece wasn’t negative, per se, its intention was to be thoughtful. And in the face of a media scrum, I often pull back until the dust settles. (There’s a media business in there somewhere, but I digress).

I figured I’d wait till Monday. Things would have settled down by then…

Well, that didn’t happen. Compared to Google’s IPO, which was controversial for very different reasons (they ran a “modified auction,” remember?), the Facebook IPO is quickly becoming the biggest story in tech so far this year. And unfortunately for the good people at Facebook, it’s not a positive one.

The starting gun of Facebook’s IPO woes was the news that GM planned to pull its $10 million spend - but would continue to invest around $30 million in maintaining its Facebook “presence.” Interestingly, that $30 million was not going to Facebook, but rather to GM’s agency and other partners. I’m not sure how that $30 million is spent – that’s a lot of cheddar to have a presence anywhere (you could build about 15 Instagrams with that kind of money, for example). But most have speculated it goes to staffing social media experts and working with companies like Buddy Media, buying “likes” through third party ad networks, and maintaining a burgeoning amount of content to feed GM’s myriad and increasingly sophisticated presence on the site.

Now, some folks have said the reason GM pulled its ads were because the auto giant failed to understand how to market on Facebook – but if that’s true, I’m not sure it’s entirely GM’s fault. Regardless, since the original WSJ piece came out, a raft of pieces questioning Facebook’s money machine have appeared, and they mostly say the same thing. Here’s last week’s New York Times, for example (titled Ahead of Facebook I.P.O., a Skeptical Madison Ave):

“It’s one of the most powerful branding mechanisms in the world, but it’s not an advertising mechanism,” said Martin Sorrell, chief executive of WPP, the giant advertising agency.

“Facebook’s a silo,” said Darren Herman, the chief digital media officer at the Media Kitchen, an agency that helps clients on Facebook. “It is very hard to understand the efficacy of what a Facebook like, or fan or follow is worth.”

It seems, just ahead of the IPO, folks were realizing that Facebook doesn’t work like Google, or the web at large. It’s a service layered on top of the Web, and it has its own rules, its own ecosystem, and its own “native advertising platform.” In the run up to the IPO, a lot of folks began questioning whether that platform stands the test of time.

I’ll have more thoughts on that below, after a quick review of the past few days in FacebookLand.

What Just Happened?!

As I outlined above, Facebook faced a building storyline about the efficacy of  its core revenue model, right before the opening bell. Not a good start, but then again, not unusual for a company going public.

One of the inevitabilities of negative news about a company is that it begets more negativity – people start to look for patterns that might prove that the initial bad news was just the tip of an iceberg. When word came out last week that demand for the stock was so high that insiders planned to sell even more  shares at the open, many industry folks I spoke to began to wonder if the “greater fool” theory was kicking in. In other words, these people wondered, if the bankers and early investors in Facebook were increasing the number of shares they were selling at the outset, perhaps they knew something the general public didn’t – maybe they thought that $38 was as high as the stock was going to get – at least for a while.

Clearly, those industry folks were talking to more than just me. The press started questioning the increase. As Bloomberg reported at the time: “…insiders’ decision to pare holdings further may heighten some investors’ concern over Facebook’s earnings growth, said Greenwood Capital’s Walter Todd.”

That quote would prove prescient.

As Facebook opened trading last Friday, the stock instantly shot up – always taken as a good sign – but then it began to sink. Were it not for significant supportive buying by the offering’s lead banker, the stock would have closed below its opening price, an embarrassing signal that the offering was poorly handled. Facebook closed its first day of trading up marginally – not exactly the rocketship that many expected (a crowdsourced site predicted it would soar to $54, for example).

Then things got really bad. Over the weekend, officials at NASDAQ, the exchange where Facebook debuted, admitted they bungled the stock’s opening trades due to the massive demand, citing technical and other issues. Monday, the Wall Street Journal, among many others, questioned Morgan Stanley’s support of the stock. To make matters worse, the stock slid to around $34 by the end of the day.  A frenzy of media coverage erupted – including a number of extraordinary allegations, first made late Monday evening, around insider information provided verbally to institutional investors but not disclosed to the public. That information included concerns that Facebook’s ad revenues were not growing as quickly as first thought, and that mobile usage, where Facebook’s monetization is weak, was exploding, exposing another hole in the company’s revenue model.

In other words, what my industry sources suspected might have been true  - that insiders knew something, and decided to get out when the getting was good – may have been what really happened. True or not, such a story taints the offering considerably.

Predictably, those allegations have spawned calls for investigations by regulatory authorities and lawsuits or subpoenas by individual investors as well as the state of Massachusetts. On Tuesday, the stock sank again, closing at near $31, $7 off its opening price and more than $10 off its high point on opening day.

Not exactly a honeymoon for new public company CEO Mark Zuckerberg, who got married last Sunday to his college sweetheart. Today’s early trading must provide at least some comfort – Facebook is trading a bit up, in the $32 range, a price that many financial news outlets reported as the number most sophisticated investors felt was correct in the first place.

Is the worst of it over for Facebook’s IPO? I have no idea. But the core of the issue is what’s most interesting to me.

Stepping Back: What’s This Really All About?

Facebook is  a very large, very profitable company and I am sure it will find its feet. I’m not a stock analyst, and I’m not going to try to predict whether or not the company is properly valued at any price.

But I do have a few thoughts about the underlying questions that are driving this whole fracas – Facebook’s revenue model.

Facebook makes 82% of its money by selling targeted display advertising – boxes on the top and right side of the site (it’s recently added ads at logout, and in newsfeeds). Not a particularly unique model on its face, but certainly unique underneath: Because Facebook knows so much about each person on its service, it can target in ways Google and others can only dream about. Over the years, Facebook has added new advertising products based on the unique identity, interest, and relationship data it owns: Advertisers can incorporate the fact that a friend of a friend “likes” a product, for example. Or they can incorporate their own marketing content into their ads, a practice known as “conversational marketing” that I’ve been on about for seven or so years (for more on that, see my post Conversational Marketing Is Hot – Again. Thanks Facebook!).

But as many have pointed out, Facebook’s approach to advertising has a problem: People don’t (yet) come to Facebook with the intention of consuming quality content (as they do with media sites), or finding an answer to a question (as they do at Google search). Yet Facebook’s ad system combines both those models – it employs a display ad unit (the foundation of brand-driven media sites) as well as a sophisticated ad-buying platform that’d be familiar to anyone who’s ever used Google AdWords.

I’m not sure how many advertisers use Facebook, but it’s probably a fair guess to say the number approaches or crosses the hundreds of thousands. That’s about how many used Overture and Google a decade ago. The big question is simply this: Do those Facebook ads work as well or better than other approaches? If the answer is yes, the question of valuation is rather moot. If the answer is no…Facebook’s got some work to do.

No such question hung over Google upon its stock debut. AdWords worked. People came to search with clear intent, and if you, as an advertiser, could match your product or service to that intent, you won. You’d put as much money as you could into the Google machine, because profit came out the other side. It was an entirely new model for advertising.

I think it’s fair to say the same is not yet true for Facebook’s native advertising solution. And that’s really what Facebook Ads are: the biggest example of a platform-specific “native advertising” play since Google AdWords broke out ten years ago.

But it’s not clear that Facebook’s ad platform works better than any number of other alternatives. For brand advertisers, those large “rising star” units, replete with video capabilities and rich contextual placements, are a damn good option, and increasingly affordable. And if an advertiser wants to message at the point of intent, well, that’s what Google (and Bing) are for.

It’s astonishing how quickly Facebook has gotten to $4billion in revenue – but at the end of the day, marketers must justify their spend. Sure, it makes sense to engage on a platform where nearly a billion people spend hours each month. But the question remains – how do you engage, and who do you pay for that engagement? Facebook is huge, and terribly successful at engaging its users. But what GM seems to have realized is that it can engage all day long on Facebook, without having to pay Facebook for the privilege of doing so. Perhaps the question can be rephrased this way: Has Facebook figured out how to deliver marketers long-term value creation?  The jury seems out on that one.

Now that Facebook is public, it will face relentless pressure to convince that jury, which now demonstrates its vote via a real time stock price. That pressure could force potentially new and more intrusive ad units, and/or new approaches to monetization we’ve yet to see, including, as I predicted in January, a web-wide display network driven by Facebook data.

As Chris Dixon wrote earlier in the month:

The key question when trying to value Facebook’s stock is: can they find another business model that generates significantly more revenue per user without hurting the user experience?

A good question, and one I can only imagine folks at Facebook are pondering at the moment. Currently, Facebook’s ads are, in the majority, stuck in a model that doesn’t feel truly native to how people actually use the service. Can Facebook come up with a better solution? Integration of ad units into newsfeeds is one approach that bears watching (it reminds me of Twitter’s approach, for example), but I’m not sure that’s enough to feed a $4billion beast.

These questions are fascinating to consider – in particular in light of the “native monetization” craze sweeping other platforms like Tumblr, Twitter, Pinterest, and others. As I’ve argued elsewhere, unique approaches to marketing work only if they prove a return on total investment, including the cost of creating, optimizing, and supporting those native ad units when compared to other marketing approaches. Facebook clearly has the heft, and now the cash, to spend considerable resources to prove its approach. I can’t wait to see what happens next.

An Appreciation of The “Home Phone”

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Last night on a whim I asked folks on Twitter if they had a home phone – you know, a “hard line” – the k ind of communications device that used to be ubiquitous, but seem increasingly an anachronism these days. The response was overwhelming – only three or four of about 35 responses, about ten percent, said they did, and most of those had them due to bad cel reception or because it makes people feel safe in case of an emergency (the “911 effect”).

The reason I conducted my unscientific poll on the home phone came down to my own experience – my home phone (yes, I have one) rings quite rarely, and when it does, it’s almost always a telemarketer, despite the fact that we’re on the “do not call list.” All of our friends and family know if they want to get in touch, they need to call our cels. Of course, our cels don’t work very well in the hills of Marin County, California, which creates a rather asynchronous sense of community, but more on that in a bit.

I set about writing this post not to bury the home phone, but to celebrate it. The home phone is relatively cheap, incredibly reliable, and – if you buy the right phone – will work for years without replacement. Oh, and far as I can tell, a home phone won’t give you brain cancer.

In a perfect world, the hard line should have become a platform for building out an entire app ecosystem for the home. And yet….it didn’t. Thanks to its monopoly nature and the resultant lack of competition, basic home phone service hasn’t changed much in 20 or so years – we got voice mail, call waiting, and a few other “innovations,” and that’s about it. It’s a dumb technology that is only getting dumber.

Now, I understand why the hard line is dying – mobile telephony is much more convenient for the consumer, and far more profitable for the telephone companies. Mobile phones are not a regulated monopoly (at least, not quite yet), so there’s a lot more innovation going on, at least at the platform level.

But I’m not sure we’ve really thought about what we’re losing as we bid adieu to the home phone (and I’m not talking about 911, which is a mostly solved problem). That one phone number – I can still remember mine from my earliest days growing up – was a shared identity for our family. When it rang, it forced a number of social cohesions to occur between us – we’d either race to answer it first (if we thought it might be for us) or we’d argue over who should get it (if we didn’t). An elaborate system of etiquette and social standards flowered around the home phone: how long a child might be allowed to stay on the phone, how late one could call without being impolite, and of course the dread implications of a late night call which violated that norm.

In short, the home phone was a social, shared, immediate technology, one that existed in rhythm with the physical expression of our lives in our most formative space: Our home. But it’s quickly being replaced by a technology that is private, mobile, asynchronous and virtual. Today, my kids don’t even look up if our home phone rings. But they’ll spend hours up in their room, texting their friends and chatting over the Internet. In other words, the loss of the home phone has sped up the phenomenon Sherry Turkle calls “being alone together.” We may be in the same physical space, but we are not sharing the same kind of social space we used to. And something is lost in that transition.

We may yet might decide there’s value in what the home phone once represented. I believe smart entrepreneurs will see opportunity in the “hard line,” and might help us rediscover the benefits of sharing some of our communications bounded once again in real space and time.

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.

 

New Feeds For Searchblog

By - May 15, 2012

Pardon the site-specific interruption, but as part of my ongoing quest to keep my content here on my own site, I’ve begun posting pictures of stuff here that I’d otherwise put on Instagram, Twitter or other services. Given that many of you read Searchblog for my trenchant commentary as opposed to my preferences in pinots, I promised you that I’d create new RSS feeds. Well, here they are!

You’ve got a lot of choices – Everything (all photos and posts), Everything But Photos, Headlines Only, and Photos Only.

Many thanks to the team at Blend for helping me make this happen.

Enjoy!

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.

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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.

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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)

Jaron Lanier: Something Doesn’t Smell Right

By - May 08, 2012

Jaron Lanier’s You Are Not A Gadget has been on my reading list for nearly two years, and if nothing else comes of this damn book I’m trying to write, it’ll be satisfying to say that I’ve made my way through any number of important works that for one reason or another, I failed to read up till now.

I met Jaron in the Wired days (that’d be 20 years ago) but I don’t know him well – as with Sherry Turkle and many others, I encountered him through my role as an editor, then followed his career with interest as he veered from fame as a virtual reality pioneer into his current role as chief critic of all things “Web 2.0.” Given my role in that “movement” – I co-founded the Web 2 conferences with Tim O’Reilly in 2004 – it’d be safe to assume that I disagree with most of what Lanier has to say.

I don’t. Not entirely, anyway. In fact, I came away, as I did with Turkle’s work, feeling a strange kinship with Lanier. But more on that in a moment.

In essence, You Are Not A Gadget is a series of arguments, some concise, others a bit shapeless, centering on one theme: Individual human beings are special, and always will be, and digital technology is not a replacement for our humanity. In particular, Lanier is deeply skeptical of any kind of machine-based mechanism that might be seen as replacing or diminishing our specialness, which over the past decade, Lanier sees happening everywhere.

Lanier is most eloquent when he describes, late in the book, what he believes humans to be: the result of a very long, very complicated interaction with reality (sure, irony alert given Lanier’s VR fame, but it makes sense when you read the book):

I believe humans are the result of billions of years of implicit, evolutionary study in the school of hard knocks. The cybernetic structure of a person has been refined by a very large, very long, and very deep encounter with physical reality.

Lanier worries we’re losing that sense of reality. From crowdsourcing and Wikipedia to the Singularity movement, he argues that we’re starting to embrace a technological philosophy that can only lead to loss. Early in the book, he writes:

“…certain specific, popular internet designs of the moment…tend to pull us into life patterns that gradually degrade the ways in which each of us exists as an individual. These unfortunate designs are more oriented toward treating people as relays in a global brain….(this) leads to all sorts of maladies….”

Lanier goes on to specific examples, including the online tracking associated with advertising, the concentration of power in the hands of the “lords of the clouds” such as Microsoft, Facebook, Google, and even Goldman Sachs, the loss of analog musical notation, the rise of locked in, fragile, and impossibly complicated software programs; and ultimately, the demise of the middle class. It’s a potentially powerful argument, and one I wish Lanier had made more completely. Instead, after reading his book, I feel forewarned, but not quite forearmed.

Lanier singles out many of our shared colleagues – the leaders of the Web 2.0 movement – as hopelessly misguided, labeling them “cynernetic totalists” who believe technology will solve all problems, including that of understanding humanity and consciousness. He worries about the fragmentation of our online identity, and warns that Web 2 services – from blogs to Facebook – lead us to leave little pieces of ourselves everywhere, feeding a larger collective, but resulting in no true value to the individual.

If you read my recent piece On Thneeds and the “Death of Display”, this might sound familiar, but I’m not sure I’d be willing to go as far as Lanier does in claiming all this behavior of ours will end up impoverishing our culture forever. I tend to be an optimist, Lanier, less so. He rues the fact that the web never implemented Ted Nelson’s vision of true hypertext – where the creator is remunerated via linked micro-transactions, for example. I think there were good reasons this system didn’t initially win, but there’s no reason to think it never will.

Lanier, an accomplished musician – though admittedly not a very popular one – is convinced that popular culture has been destroyed by the Internet. He writes:

Pop culture has entered into a nostalgic malaise. Online culture is dominated by trivial mashups of the culture that existed before the onset of mashups, and by fandom responding to the dwindling outposts of centralized mass media. It is a culture of reaction without action.

As an avid music fan, I’m not convinced. But Lanier goes further:

Spirituality is committing suicide. Consciousness is attempting to will itself out of existence…the deep meaning of personhood is being reduced by illusions of bits.

Wow! That’s some powerful stuff. But after reading the book, I wasn’t convinced about that, either, though Lanier raises many interesting questions along the way. One of them boils down to the concept of smell – the one sense that we can’t represent digitally. In a section titled “What Makes Something Real Is That It Is Impossible to Represent It To Completion,” Lanier writes:

It’s easy to forget that the very idea of a digital expression involves a trade-off with metaphysical overtones. A physical oil painting cannot convey an image created in another medium; it is impossible to make an oil painting look just like an ink drawing, for instance, or vice versa. But a digital image of sufficient resolution can capture any kind of perceivable image—or at least that’s how you’ll think of it if you believe in bits too much. Of course, it isn’t really so. A digital image of an oil painting is forever a representation, not a real thing. A real painting is a bottomless mystery, like any other real thing. An oil painting changes with time; cracks appear on its face. It has texture, odor, and a sense of presence and history.

This really resonates with me. In particular, the part about the odor. Turns out, odor is a pretty interesting subject. Our sense of smell is inherently physical – actual physical molecules of matter are required to enter our bodies and “mate” with receptors in our nervous system in order for us to experience an odor:

Olfaction, like language, is built up from entries in a catalog, not from infinitely morphable patterns. …the world’s smells can’t be broken down into just a few numbers on a gradient; there is no “smell pixel.”

Lanier suspects – and I find the theory compelling – that olfaction is deeply embedded in what it means to be human. Certainly such a link presents a compelling thought experiment as we transition to a profoundly digital world. I am very interested in what it means for our culture that we are truly “becoming digital,” that we are casting shadows of data in nearly everything we do, and that we are struggling to understand, instrument, and respond socially to this shift. I’m also fascinated by the organizations attempting to leverage that data, from the Internet Big Five to the startups and behind the scenes players (Palantir, IBM, governments, financial institutions, etc) who are profiting from and exploiting this fact.

But I don’t believe we’re in early lockdown mode, destined to digital serfdom. I still very much believe in the human spirit, and am convinced that if any company, government, or leader pushes too hard, we will “sniff them out,” and they will be routed around. Lanier is less complacent: he is warning that if we fail to wake up, we’re in for a very tough few decades, if not worse.

Lanier and I share any number of convictions, regardless. His prescriptions for how to insure we don’t become “gadgets” might well have been the inspiration for my post Put Your Taproot Into the Independent Web, for example (he implores us to create, deeply, and not be lured into expressing ourselves solely in the templates of social networking sites). And he reminds readers that he loves the Internet, and pines, a bit, for the way it used to be, before Web 2 and Facebook (and one must assume, Apple), rebuilt it into forms he now decries.

I pine a bit myself, but remain (perhaps foolishly) optimistic that the best of what we’ve created together will endure, even as we journey onward to discover new ways of valuing what it means to be a person. And I feel lucky to know that I can reach out to Jaron – and I have – to continue this conversation, and report the results of our dialog on this site, and in my own book.

Next up: A review (and dialog with the author) of Larry Lessig’s Code And Other Laws of Cyberspace, Version 2.

Other works I’ve reviewed:

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)