Do We Dare Say that Journalism Has Hit the Bottom?

Last week the Pew Center released its State of the News Media report for 2014.  While the report reinforces the headwinds faced by traditional media outlets (ad revenues down 52% from 2003), it also illuminates growth in digital only news outlets that now number over 500 and employ about 5,000 full time professionals. Could it be time for the journalists to stop blaming technologists for depriving them of the means to pay for the essential service they provide?

Jeff Jarvis anointed Johannes Gutenberg as the original technologist in his 2012 book Gutenberg the Geek.  Whether or not Gutenberg needed Jarvis’ endorsement, journalism and technology have certainly been dance partners for hundreds of years.  Gutenberg’s movable type printing press brought about revolutions in business, religion, and politics and gave story tellers the ability to reach a larger audience than ever thought possible at open mic night in 1439 Strasbourg.

The advertising industry traces its roots to the very same 15th century when the practice of paying artists including Michelangelo to produce art that contained certain messages.  Many of these new visual advertisements were religious in nature. Soon politicians and business people were the fast followers of this new technology; commissioning works that were clearly promotional.  In early renaissance Italy, everybody who was anybody had a portrait with a 3D background showing off the Filippo Brunelleschi’s new technology of perspective drawing.

About a hundred years later the Gutenbergers and the Brunelleschis joined their ability to print things cheaply and their desire to encourage readers to buy things and gave birth in 1525 to advertisements as we know them today.  In fact the New York Times Book Review was not an original idea, because those early ads were mostly for books and were found in the precursor to newspapers, the broadsheet.

All of this is to make the simple case that technology is just doing what it does.  Yes, Craigslist, Yahoo!, Google, Facebook, Twitter and the rest of the techies have stolen away the revenue the newsrooms needed to survive.  However, their geek ancestors created the technology that enabled advertising and newspapers some 500 years ago for the same reason the newsroom is in the emergency room today.  The geeks are still just doing what they do.

Technology people don’t under-appreciate Ed Murrow.  23 generations after Gutenberg, they are still in the business of delivering as much information as possible to as many people as possible as cheaply as possible.  The argument that we are replacing the system that brought us back from the brink of McCarthyism with a system that serves up the best grumpy cat videos has been used to cling tightly to the way that it was for long enough.  We have now seen how new media actors like Julian Assange, Ed Snowden, and Glenn Greenwald, have worked with the New York Times, the Washington Post, and Der Spiegel to revive the fourth estate.

Certainly, there is much work to be done.  A flood of technology energy is being applied to this industry, and not just the high profile purchase of the Washington Post by Jeff Bezos, or the founding of First Look Media by Pierre Omidyar.  New media organizations are everywhere, both succeeding and failing fast in their pursuit of good journalism.  We know that 5,000 jobs created in the new digital world do not fill the hole created by the tens of thousands of jobs lost in traditional newsrooms, but it does seem possible that the bottom has been reached and working together journalism and technology are building something we should be watching.

Walks Like a Bubble, Talks Like a Bubble

Just weeks ago there was a steady stream of posts and articles saying we are not in another bubble. Since the Facebook/Instagram deal those voices are much harder to hear. Sure there have been those defending the deal as rational, but really. Instagram worth more than the NY Times? News momentum needs a trigger event, and the Instagram moment may be just the thing to reverse the news momentum and change the story.  Now we are in another tech bubble. So, when will the bubble burst? My guess is 2014 and here are my reasons:

1. Too much money looking for a home: The fundamental problem that caused the mortgage bubble still exists. The world is awash with cash because central banks have been trying to stimulate growth and there is no inflation in sight. The excess cash problem did not get solved with the mortgage crash. In fact it got worse because all of the money that came out of the mortgage market is still looking for a home, and it has been flowing into tech. At the same time, the cost to start up a tech company has dropped. So when Facebook goes public, the market will willingly value it at over $100 billion -- even though the CEO can operate without any board oversight.
2. Not much "whole new world" talk yet: The end of each bubble cycle is marked by some desperate arguments that we are in a new world (this time because of the rise of mobile) and that the people that say gravity still exists just don't "get it". I bet these arguments will become central to the news coverage of the bubble this year. 
3. It always takes longer than we think: The smart people that knew the mortgage market was a bubble, knew it in 2004. The end did not come for four more years. This one will probably seem like it is inflating forever.

It is true that smartphones are a revolution in tech. It is also true that it will accelerate the pace that new users can be brought into the market. But hey, it was also cool when the Americas were discovered or electricity was invented. Those bubbles burst and this one will too.

A Facebook for Government Transparency

We want to know more about the way our government works and we want the government to know less about what we are doing.  Unfortunately, right now the trend is going the other way. But what if it did not?  Right now governments use Facebook to follow their citizens.  This is pretty widely documented in countries with poor human rights records like Syria.  We can only hope that Facebook is putting significant effort into keeping our government from turning Facebook into the ultimate citizen watching system.  Ironically, in America where Facebook was created, we are the ones that are supposed to have access to the doings of our government and our government is not supposed to have access to our private lives. 

Imagine a Facebook for government.  Each representative would have a page.  All associations ("friends") between elected officials and donors and lobbyists would be listed.  All meetings, emails, phone calls, and flows of money would be cataloged and displayed for anyone to see.  It would be a citizen’s dream: transparent representation.  Right there on your representative's "wall" would be their attendance and voting record.  Cool. 

Who wouldn’t want such a thing?  Well, what honest government would not want such a thing?

The Value of Second Level Assets

A smart Wall Street guy recently described to me a new way to think about the value of a stock in an overheated market.  He proposed that there were really two parts to value.  The first of course is the underlying value of the share.  And the second is the option the holder of the share holds implicitly to sell the share at a time of his choosing. This could be called the option to sell to the greater fool, but let's not start calling people names.

This second layer of value can be greater than the first.  In other words, particularly in a momentum market, the right to sell is worth more than the stock itself.  This is interesting because it is a good visualization of an emerging class of assets that derive their value entirely as a function of their relationship to an underlying asset. 

Some will say this is nothing new.  A steak at a steak house costs three times as much as a steak at home.  Such an item could be described in two parts as well: the steak and the experience of eating it at the steak house.  Again the second part is likely more valuable than the steak itself.  Milk at the Mini Mart has two parts, the milk, and the convenience of buying it quickly. 

In markets where innovation is changing the cost of producing and delivering things, the cost of the underlying asset is decreasing quite quickly.  Take ebooks for example, the cost to create and deliver the next copy of an ebook is essentially zero.  This creates an environment where it is easy to see how there is relatively more value in the second, derivative asset, than in the ebook itself.   The derivative asset to an ebook could be merely the recommendation of the right book, or who is reading what book, or comments about the book, or quotes from the book.  If you were about to pitch a big deal, how much would you pay to know what the person on the other side of the table was reading the day before your meeting?  At the risk of offending the authors who clearly invest themselves in their craft and create valuable work, we must ask: Is there more value in the marketplace to the second level information about the book than in the book itself? 

Apple, Google, Amazon and Facebook have been named as the new horsemen in technology.  These companies recognize the value of being one layer removed from the actual asset.  Google and Facebook both pay their customers (by offering free services) in exchange for this second level information – so clearly they assign value to it.  Apple exploits the second level information less than the others – mostly because it’s history is making money selling devices.  They are getting smarter about this all of the time and the Apple iCloud announcements last week betray their interest in being in the second level game.  Amazon is the one with the superior business model.  Not only does Amazon make money selling products, but they are expert at using the second level information to sell even more stuff.  Amazon has a much more concrete awareness of what you “like” and knows how to use that information to present you with other products to purchase.

More examples of this construct emerge every day, and many in places commonly thought of as confidential:

• Banks:  I received an offer today from my bank to purchase access to their database of financial statements.  These are financial statements their customers have submitted as part of their traditional banking relationship.  Banks make money in many ways, and now they are making money selling access to the information they collect about their customers.
• Phone Companies:  The contents of your phone call cannot be “tapped” without a search warrant, but law enforcement regularly pays the cellular companies for the second level information.  That data includes, who you called, how long you talked, and where you were (while talking or just while the phone was on).  Law enforcement does not need probable cause or a search warrant to get this information and the cellular providers have automated access to the database, so the fees they collect are pur profit.
• Credit Card Companies:  Your credit card issuer makes 2 to 5% off of every transaction, plus they sell the information about how much you spend at what vendor.  Soon you will be seeing advertisements on your credit card bill.

Where could this go next?  Here are the services I would like to buy:

• On the plane:  I would pay extra to sit next to a thin person or better yet a client or potential client.  In the case of the potential client, I would probably pay more than the cost of the ticket itself.  This could also go for any event.
• Buying Things:  The next time I buy a house I would like to know which houses are going to come on the market next.  So information about people looking to move, getting transferred, or experiencing other life changes would be valuable to me.  Facebook could have this already, but other big databases will likely get mashed up to provide information like this.
• Healthcare:  The next time I get a cold or the flu, or better yet, before I get a bug, I would like to go online and see what is happening in my area.  Who is suffering symptoms (Google has this because people do searches for their symptoms, the healthcare companies have it once people go to the doctor, and schools and employers have it once people call in sick) plotted on a map and compared to historical data.
• The Government:  The government could become the biggest player in this area.  Think of the gold in the IRS’s databases.

Things are definitely getting interesting. Maybe my next post should be about privacy!

All New Horsemen

Erik Schmidt got some attention at the All Things Digital conference naming new horsemen in the tech industry.  The old horsemen were commonly listed as Microsoft, Intel, Cisco, Dell.  Schmidt rather self congratulatorily named Google,  Amazon, Facebook and Apple as the new four.  Sure things are changing, but a completely new field of horsemen, really? 

What is it with the horsemen anyway?  One must wonder how we got onto the horsemen thing in tech, it seems like we would want to stay as far away as possible from an allegory rooted in conquest, war, famine and death.  If you have some time to kill, check out the Wikipedia entry for the Four Horsemen of the Apocalypse, for a not so brief introduction to the idea of horsemen.

Is there a new reality in tech and if so is this it?

With the possible exception of Dell, which specialized in advanced supply chain management, the old four developed technology and sold it to individuals and businesses and those customers employed the technology to achieve their ends.  The old horsemen are in fact still in business, and will be for some time.  IBM may not have liked being left off of the old list, but they have done pretty well for themselves in the last decade with their stock up 50% in the last decade compared to losses for the others.

With the possible exception of Apple, the new four don’t sell technology at all.  I suspect they are often thought of as technology companies because of their use of the Internet in their business models.  The wholesale switch is notable, and mostly for Microsoft.  Indeed, Microsoft has not been performing well on the stock market over the last decade with a drop of over 50% while all of the others are up and Apple is up a whole bunch.

These new horsemen are going to drive the delivery of a new kind of computing services. Even if this shift only turns out to be half as big as Mr. Schmidt predicts, it is going to have a profound impact on how technology is sold.  This is commonly referred to today as the migration to the cloud, and is so overhyped that often we forget to stop and think about what that actually means. 

First a review, technology resellers used to make money marking up hardware and shrink wrapped software.  Then they made money adding integration and support services to the sale of hardware and software, and next they will make money delivering innovation.  Here are some examples of this phenomenon:

• DropBox (www.dropbox.com) is a file system in the cloud.  You can get to your files from any device.  It is Amazon’s infrastructure on the back end, but no one has to know that.
• WordPress or SquareSpace (www.wordpress.com; www.squarespace.com ) are content management systems in the cloud.  Anyone can publish a website or blog on these sites and all of the hosing is handled.  Although one step removed, these companies rely on Google for indexing and discovery.  Google is also seeding the next wave of these companies with Picasa and Google voice. These may seem like birds of a different feather, but before you say so think about searching images or audio files.  Google’s partners make money by helping their clients manage content and show up online in the right places.
• Security is making sure content does not show up in the wrong places like when credit card information is stolen, or weapons system blueprints land in Peking.  Facebook has designs on knowing who you are and where you are and (soon) what you buy and what you have access to.  Making sure the keys to the kingdom, your keys that is, remain in your own control is important and will be big business.  Emerging in this field are upstarts like Reputation.com and Klout.com, and established firms like Symantec.

Before you think that this blog post has gone off of the rails, let me state plainly that I am not proposing DropBox, WordPress, SquareSpace, Reputation.com, and Klout.com as services that partners can mark up and resell.  I am proposing that these are the new channel partners and that they exist in a sympathetic ecosystem with the new horsemen.

These forward thinking channel partners do not think of themselves as channel partners.  They think of themselves as the inventors of a new wave of services.  Nevertheless, they are channel partners because they make money packaging new technology into services that add value to consumers and business.

Facebook's Deal with the Devil

The Economist last week recalled a vivid description by Rolling Stone of Goldman Sachs:  "a great vampire squid" that likes to stick its "blood funnel" into anything that can make it money.  So given all of the advantages that Facebook has, why would a smart guy like Mark Zuckerberg subject himself to a bleeding by the many tentacled machine of Wall Street?  

Maybe Zuckerberg knows that there are bad guys in the world and bringing in the firm that is the best at aggressively pursuing its own self interest will equip Facebook to fend off the other bad guys.  In essence, a deal with the devil.  Who are the these bad guys?  One of Facebook's biggest shareholders is Digital Sky Technologies (DST), the firm of Alisher Usmanov, a Russian oligarch with ties to Vladimir Putin and Dmitry Medvedev.  Even executives with ten times Zuckerberg's experience would be worried when considering how to control DST.  With Goldman at the table could the dynamics of the relationship between Zuck and the Russians be improved?

If that is not enough incentive, there could be a bigger one right here in the USA.  Goldman Sachs may be good at the things it talks about on its web site, but they really shine when it comes to manipulating our government.  And Facebook needs all the help they can get controlling the US government. Twitter disclosed last week that the government had requested access to data on Julian Assange and people associated with him.  To Twitter's credit they chose to disclose this request to the public.  We can be sure that similar letters were sent to Facebook, Google, and other service providers.  But we did not hear a word about those.

It is a little spooky thinking about government agencies combing through Facebook data, but we can be pretty sure that Facebook's nearly 600 million users, their relationships with other users, and all of the interactions between them must be irresistible to our many law enforcement and counter terrorism groups.   I know that if I had to figure out how to deal with the FBI or CIA, not to mention the SEC,  having Goldman's muscle to back me up would be quite welcome.  

Could Blackwater or Halliburton be next?

Post 272

Well it has been a year and this is my 272nd post.  I set out to write a blog entry every day and even though I came up a few short, I have enjoyed organizing my thoughts and working on my writing in 2010.  

Thinking about why I do what I do, or what I plan to do in the future is unavoidable (for me anyway) as the calendar changes to a new year.  The blog posts I wrote this year were adequate notes to myself about what I was thinking at the time, and the fact that 4,000 other people found my posts interesting enough to read is flattering.  

So what to do in 2011?  I have no plans to become a journalist, so I am not looking for a scoop or to break a story.  I do think I could put more effort into some bigger writing pieces that further organize my thinking into actual arguments.  So in the weeks ahead I am going to pick a few main themes and start to develop them into longer essays that argue a particular point.

Here are some possible subjects based on the number of entries I made this year organized into broad categories:

Tech Marketing (113 entries):  I write a lot about this because my company helps large tech companies with sales and marketing.  I think the changing role of the salesperson is worth spending time thinking about with Google and Facebook on one end of the spectrum because they really have no salespeople, and Salesforce.com on the other end spending 50% of revenue on salespeople.  I don't know how this is going to work out but it sure will be interesting to watch.

New Media (51 entries):  My second most written about topic is new media.  To me New Media is the decline of the newspaper, publishing, and TV we grew up with and the rise of blogging, micro blogging, social media, and streaming media over the Internet.  We live in a very interesting time and the creative destruction of this sector is one of the things that makes it so interesting.

Politics (47 entries):  Next in line is politics - mostly in the US, but invariably overlapping with the rise of China as a world power.  The big question of course is whether or not the US will stay on top and how many wars will we start as we struggle with our identity.

Economics (44 entries): Finally economics.   In the world I want to live in, those that create the most value get the most rewards.  It does not take long to see that right now getting rewarded is often disconnected from value creation.  Will my pollyannaish view of the world find its way into reality, or will Goldman Sachs continue to gobble up everything for themselves?

There is one other subject that I find very interesting and that weaves throughout all of this: demographics.  We often define people in groups and evaluate the relationships between the groups based on our understanding of the average within that group.  This tendency prevents us from seeing the real picture.  The growth rate of a nation's GDP or even the GDP per capita does not tell us very much.  The unemployment rate in the US is around 10% -- but some sectors cannot find enough workers and others have 25% unemployment.  If you are interested in this subject, read this from Foreign Affairs.  Sure there are well over a billion people in China, but half of them are subsistence farmers who do not participate in the economy.  

I am looking forward to digging in on these topics during 2011.  As always, your comments and thoughts are appreciated.

Evolution or Revolution in 2011

Every other newspaper story in 2010 seems to include a reference to how this next generation of Americans will have it worse than their parents for the first time in well, ever.  I have been there among the alarmists trying to get people to worry more about the balance of trade, the state of our educational system, corruption in Washington, and others issues.  Change does not come easily to humans and we all know that the bigger the problem, the more likely we are to change our behavior.  This creates bad news inflation to inspire change.  We hear it all day every day from just about every interest group.

I have to wonder:  Does it work?  Do people really change their behavior from fear of bad things happening?  There is some evidence that people do.  There are many waterways in the US that have recovered from terrible pollution, we all recycle, and after suffering heart attacks - eating and exercise habits change.  It could be said credibly then, that people's behaviors can evolve.

Alternatively, people often do new things.  Electricity, railroads, the Panama canal, the car, the plane, the space race, the computer, the Internet, and the cellular phone came to us as new things.  New things that humans adopted vigorously.  These were revolutionary new things.

When talking with founders of start up companies or the people that finance them, the common belief is that new things get adopted if they are ten times better or ten times cheaper than the thing being displaced.  The new thing gets adopted, the old thing dies, Schumpeter is proven right, and change happens.  Revolution brings about much more change than evolution.

Could 2011 be the year where some of this revolution happens and we regain the hope that our kids will be better off than we are?  Here are a few areas to watch:

1. Innovation Engine:  Innovation happens because the innovators have confidence that they will preserve the value of what they create.  Many companies are built round the patent and copyright systems, but many more have captured the value of their innovation without those constructs.  Neither Google or Facebook are protected by patents or copyrights.  This structural IP protection scheme will fuel an explosion of innovation -- limited only by the ability of people to think freely.
2. Leap Frog:  The idea that an emerging nation can leap frog the developed nations by rapid deployment of new technologies is a myth.  A village with no telephone landlines and just cell phones has acquired communications capabilities much faster than anyone had dreamed, but can anyone really argue that they have leap frogged over and ahead of a town that has had landlines for 100 years and has cell phones too? This phenomenon will create markets for products from the developed nations.  The first will be healthcare, the second will be education, and right after that -- anything that conveys status.
3. Work Redefined: Soon we will be re-allocating all of the time we used to spend as computer operators to other productive activities.  This could represent a dramatic change in productivity.  Here is a post on the subject from November 30.

I hope that 2011 is the year that the revolution takes hold.  I hold out less hope for the evolution part.  Either way it will be quite interesting to watch these things play out.

Birds of a Feather

In recent posts here and here I have proposed that Facebook, Google, and Groupon are advertising companies because their clients pay them for advertising.  I argued that they use the Internet and technology to do what they do, but that calling a company an Internet company is soon to seem very old fashioned.  Would you call General Electric an electricity company?  Would you call the New York Times a printing press company or an Internet company, or a news company? (I think news because they still do have subscribers that buy the paper, but advertising is right in there too.)

Where does Twitter fit in?  Right now they don't seem to be getting paid for anything.  It is likely that their monetization scheme will be advertising.  Whatever they pick, I am sticking with my assertion that companies serve the people that pay them.  Before long Twitter will be an advertising company too.  

Here is a post from some time about about Third Party Payers.  True, there are many industries with third party payment systems and most of them are broken.  Companies would be smart to recognize that they serve their true masters -- those that pay the bills.

Facebook is Advertising for You

My daughter turned 13 last week and wants a Facebook page.  So we were talking about it and had a very interesting conversation.  In the end I agreed that she could have a Facebook page as long as she remembered this:

• Facebook makes money by selling your information to others
• People will form impressions of you by the way you present yourself on Facebook
• Once your information is on Facebook you can never take it back

It was an interesting conversation and as with many interesting conversations I came away with some realizations including the fact that a young person probably cannot opt out of Facebook.  By the time she gets to college, the admissions people will be looking at all applicants in the context of their Facebook presence. Without one an applicant could be at a disadvantage.

So my final wrap up was the idea that Facebook is an advertisement to the world of you.  Use it to your advantage.

While you are thinking about Facebook. You might want to check out the 60 minutes piece from last week.  You may want to pick a different segment on the CBS site -- but after looking at a few of them, it is hard to find one that shows the whole Zuckerberg segment.

Ten Secrets to Keep From Google or Facebook

I am a big believer in Transparency.  So big in fact, that we have developed our own definition at CSG:  "We tell the other party everything we would want to know if we were them."  The other party we refer to could be employees, customers, partners, and vendors.  There are some people however that don't gain admittance to the "other party" group.  Certainly competitors would not obtain this status.  In fact, we are quite careful not to expose information about our company to competitors.

Both Mark Zuckerberg and Eric Schmidt have declared that the only people not interested in transparency are those with some bad behavior to hide.   This is preposterous.  Here are the first 10 things I can think of that I would not want Facebook or Google to know about me with the reasons:

1. Anything that would aid someone trying to steal my identity:  Surely the Social Security number is top on this list, but also credit card numbers, passport number, date and place of birth, mothers maiden name, drivers license number, bank account numbers.  Identity theft is big business and very harmful to its victims.  I think anything on my business card is fair game.
2. Anything that would aid other criminal behavior with me as the victim:  The number one thing here is location.  There is a very real threat of burglary and even peaserobme.com has stopped contributing to the problem.  In many countries kidnapping is a threat.  So I don't want Google or Facebook to know where I am, what I am doing, my travel dates, or information about assets people may want to steal (VIN number on my car...).
3. Anything that would aid criminal behavior with my friends as victims:  Location is big here too.  If I indicate my location and who I am with -- I also indicate their location.  Being male and 200 pounds, I really don't worry that much about being attacked.  But in most parts of our country it is not advisable for a female to walk to her car alone at night.  I would not want to do anything that would broadcast such a walk to persons with criminal intentions.  Many tech savvy women around the world do not participate in location based services in real time -- for this very reason.  (they make a habit of checking in on FourSquare well after they have already left)
4. Anything I don't Want the Government to Know:  Our country was built on a deep suspicion of the government and a belief in the right to privacy.  I do not have to have illegal or immoral intent to want privacy from my government.
5. Anything about sensitive business relationships:  Managing relationships is hard work and there are many opportunities for misunderstandings.  I would not want my performance reviews, my salary, or the terms and conditions of other business dealings I have with my employer shared on the internet.  Facebook hires people from Google every day -- but is not posting on Facebook who they are pursuing or what they are offering to pay. 
6. Future business deals:  In business we often engage in conversations about potential future relationships.  When interviewing candidates for a job, we talk to more than one person.  When hiring a new vendor, we talk to more than one.  When engaging with partners or pursuing new customers we are constantly in conversations in parallel.  The content of those conversations, or even who the parties are, should not be shared with Facebook or Google.  There is nothing unethical about interviewing for a job or requesting a salary of a certain amount.  
7. Intellectual Property or Business Know How:  Google does not share its page ranking algorithm, or the innovations it has developed in running large datacenters.  Facebook does not share how it extracts from the Facebook stream the information it sells to advertisers. 
8. My Deepest Fears:  If I wake up in the middle of the night with a pain in my abdomen and I start doing searches about cancer -- I don't want Google or Facebook to know.  Particularly when in the morning it turns out to be indigestion.
9. My Biggest Conflicts:  If I get sideways with my best friend or my spouse, I want time to work it out before the whole world knows.
10. My Dreams: Talking pie in the sky with my friends is great fun.  Is there something evil in wanting to keep my dreams close to my vest?  I may want to climb Mt. Everest, bring education to Afghanistan, or start a company that makes a nickel every time someone clicks on something, and not wanting to broadcast it indicates nothing unsavory.

There are many people who proclaim that the march to transparency is inevitable and that we should not resist.  Some even proclaim to live their own lives in public.  I suspect neither those people, or Eric Schmidt, or Mark Zuckerberg would have a very different list than this.  

Google Reads Your Email, and Facebook is Jealous

Gmail is free – provided you don’t assign any cost to Google reading your email.  It is a simple case of risk and reward.  Gmail users have accepted this trade off because the utility (reward) of the service eclipses the perception of the risks associated with the lack of security.  Facebook aspires to be the owner of identity management for the purpose of selling personal information to marketers and cannot imagine being left out of the email reading business.  So this week Facebook will announce their own free email service.

It will be interesting to see how long users accept this lack of security.  Clearly Google crossed the line earlier this year when they pushed Buzz too close to gmail and got big blowback – so users are not completely ambivalent about security.  There have been a few cases (This American Life; Gizmodo) where federal officials have pursued people because of posts on Facebook.  A few more of these and law abiding citizens could start to fear Facebook, Google and other free/unsecure services.

Yes  it is legal for Google and Facebook to read your email because of the agreement you accept when signing up.  Of course no one reads those agreements, and most people know that their employers can legally read their email too – so adding Google or Facebook probably doesn’t really register.  If there is a tipping point on the horizon where security becomes as big or bigger than convenience, what will the users do? 

Last week I was at Mark Anderson’s Fire Global conference in Seattle where Steven Sprague (Wave Systems) proposed this idea:  “What if I could encrypt my data before sending it to Facebook and only my friends could decrypt it.”  Could this be the next Facebook:  a system that would manage connections and encryption keys?  There would have to be a different monetization model, and it is highly unlikely that Facebook itself would go this route.  Maybe someone is out there right now building such a system.

On the email front, someone could easily emerge as the secure provider.  ISPs offer email service along with their bandwidth subscriptions, so they would be in prime position to play up the security angle.  AOL is a trusted brand and their un-hipness may even be an asset.  Apple could capitalize with its mobileme service. And last but not least is Microsoft.  Sure the Hotmail people are reading your mail, but the new Office365 paid service could be better positioned than any of the others to take advantage of this shift.

This will be an interesting one to watch.

LATER (11/14):  Just noticed that AOL launched an email revamp today.  Read about it on ZDnet here.  I don't see any mention of security, so it does not look like they are playing up the angle I thought.

The Media Spotlight Eludes the Enterprise

Even people immersed in enterprise computing would rather follow the latest product announcement by Apple or Facebook than the latest news about Network Attached Storage, or Business Intelligence Software.

You might be thinking that those business IT people probably have their own media outlets to follow and we just don't see them.  After all, we don't see news about the sewage treatment industry either but we know it is there.

I would think CIO magazine would be the place that the enterprise types hang out.  Top story today?  Windows Phone 7 and Verizon gets the iPhone.

According to Gartner the 2010 worldwide IT spending by the Enterprise will be $2.4 trillion of an overall market of $3.4 trillion.   Those of you doing the math know this makes the enterprise 72% of all IT spending.  Add into this the fact that many of the consumer tech companies like Google and Facebook are really paid in advertising dollars -- and we can't help but conclude that the technology industry is clearly dominated by the budgets of businesses.

So why no coverage?

According to Wikipiedia, Business Intelligence is computer based techniques used in spotting, digging out, and analyzing business data....often aimed to support better business decision making.  According to Gartner, the German firm SAP is the leader in the Business Intelligence market with 22.4 percent share.

This stuff is just not interesting.  No wonder we all just want to talk about the movie about Zuckerberg.

We have to figure out how to make enterprise computing interesting.

10 Reasons to Listen to This American Life 9/10/2010

Sorry to be tardy to the party, but I just today listened to the 9/10/2010 episode of This American Life, titled Right to Remain Silent.  Here are 10 reasons you should listen too.

1. If you have ever had a bad customer experience at an Apple store.
2. If you are looking for real life examples of the impact of the Patriot Act on average Americans.
3. If you are wondering if you can be arrested for posting a joke on Facebook (that you thought was private).
4. If you want to know if you should fear the police.
5. If you need some good examples on how performance measures induce the wrong behavior.
6. If you are wondering if there is anyone left that is trying to do the right thing.
7. If you think crime is really going up in NYC -- despite the "statistics".
8. If you think the decline in investigative reporting is important.
9. If you want to restore your faith in America (because WBEZ and Ira Glass were able to produce this show without fear of going to jail).
10. If you are looking for a reason to support public radio.

I could go on and on, just listen to it and let me know what you think.

Book Review: The Facebook Effect by David Kirkpatrick

I quit using facebook in May.  I have also written many posts about facebook, and I have also promised not to rant about facebook anymore.  

Count this post as the point in time when I break all of those promises at once.  I have just turned my facebook account back on and will likely start using it again.  It is hard to argue against facebook's performance and usefulness.  

There is a conflict between the natural inclination to add friends (because everyone wants the biggest number of friends possible and nobody wants to be rude and unfriend people) and the simple fact that facebook is the most useful when your friends really are your friends.  Just about all of the anguish about facebook can be traced back to this issue.  David Kirkpatrick makes this point convincingly and I agree that if you want a good facebook experience, only accept friend invitations from people you want to share your personal life with.

Mark Zuckerberg does come off as a very smart, hard working, and self assured person.  Most importantly, he is aware that he has a great deal to learn and he has sought out some of the smartest people in the business and they have agreed to advise him.  From Marc Andreessen to Bill Gates to Steve Jobs, Mark is hanging out with some very smart people.

The book does not mention Donald Rumsfeld, but it would not surprise me if Mr. Zuckerberg has talked to him too.  Our former Secretary of Defense knew that embedded reporters need not be instructed to put a positive spin on the actions of the military units they are embedded with -- because the personal relationships formed during the action take care of that.  Same is true in this case.  The author had very good access to all parts of facebook, and by the time the book was finished, the cool aid had been consumed.  

Balanced account or not, the story is unbelievable.  From 0 to 1,400 employees and 500 million users in five years is a rocket ship ride an author could only dream of and Kirkpatrick does a good job of getting the story down on paper.  The early bidding war at a $1 billion valuation and Mark's ability to resist it -- absolutely a once in a lifetime thing for the author and his subject.

So whether or not you are a facebook fan, user, or detractor: this book is one you should read.  I still do think that facebook will eventually fail, because I think all closed systems will eventually fail.  Accordingly I will continue to invest most of my energy in building an identity outside of facebook.  But there is no denying facebook is useful and will be around for a long time.

One last note: I "read" the book by listening to it on Audible.  Unfortunately the author read it himself.  This is almost always a mistake -- if you can get the printed version -- do so.

My Photo Sharing Education

Digital cameras have done a great deal for photography and it is time the web services end of the photo industry get its act together. I take several thousand pictures per year and do what I can to keep them organized.  Here is a short history of the things I have experienced when it comes to taking, sharing, and organizing pictures.

On the Mac:  In around 2003 I went to Macs big time with the thought that if anyone was going to figure this out it would be Apple.  I used all of the Apple tools like iPhoto, iMovie... and was having a great time.  I could sync all of my photos with my big iPod classic in full image mode -- so I had a regularly synced backup too.  All was good.  Then the wheels came off.  I got a new Sanyo Xacti HD video camera -- but the video format was incompatible with the mac.  There were converters, but the quality was terrible.  What is the point of taking HD video if you have to convert it to another format that looks bad?  Shortly after that the hard drive on my Mac G5 desktop failed and I lost all of my pictures.  I could get them back on my iPod -- but the folders (iPhoto's version of tagging) were all gone.  Ouch.  10,000 organized pictures now unorganized.

Windows Photo Gallery:  So I switched to Windows Photo Gallery.  The main reason was that the meta data is in a standard file format and independent of the Windows Photo Gallery software.  So if I ever decided to switch -- all of the work I would do organizing would go along with me.  Also, the organizing by date, the tagging, the integration of video and stills together, and the close integration with Windows Movie Maker -- were all attractive.  It turns out that I had just blown out of iMovie on the Mac because a new version left all of the past versions orphaned -- what was that?!?!

Video Formats:  I am still on Windows Photo Gallery but am not all that happy and am looking for another solution.  I now have a second HD video camera, this one from Sony, and the HD format is different and requires more converting before the video can be used in Windows Photo Gallery or any other software.  Somebody has got to figure this stuff out.  The codec thing is driving me crazy and my Windows machine is giving me the goofy "COM Surrogate has stopped working" error all of the time.  I have no reduced functionality and I cannot figure out what causes this, but I just minimize the error to the toolbar and call it good.  If I"X" it out, it just comes right back but if I minimize it -- it just sits there talking to itself and more or less leaves me alone.  Just a constant reminder of how screwed up computers can be.

Sharing:  I don't share photo's on Facebook because I want to control who sees them.  I am also trying to figure out how to allow my friends to get full image files of my photos.  I like Shutterfly for the private web sites it makes so easily and how the members I invite can add comments or contribute pictures.  But Shutterfly does not have image download.  I am just now trying Picasa -- but without downloading the desktop app -- the functionality is quite bad.  It seems to me that every photo sharing site either wants to you use their photo printing service (Shutterfly; Kodak Gallery...), download their software (Picasa...), or take away control of who sees you photos (Facebook...).  This area of the computer experience is very broken and should present an opportunity to someone.

Microsoft:  It would not surprise me if Microsoft has a solution to this somewhere in the Live thing.  But everytime I sit down to try to figure out what is up with Live I just cannot get my head around it.  I think it is because Microsoft wants you to be all in and therefore integrates hotmail, Messenger, and other things I don't use regularly into one experience and I just cannot figure out how it works.  When I gave it another try today was presented with a friends list (which I don't ever remember setting up, but could have over the years somehow) and they were not really any of my friends.  I could add friends but not remove them, not easily anyway... so that trail is dead too.

So for now I am sharing photos with Picasa.  Someone I invite can get the full image downloaded, but they must install the desktop application first.  

If anyone out there has a better solution -- please save me!

One Last Post About Facebook

I have found myself promising to stop writing about Facebook lately.  It surely is a tired old rant, and this really is going to be my last blog post on the matter.  After today, you can find Facebook related thoughts on a section of this website called Facebook.  

On that page I intend to chronicle my efforts to find a suitable replacement.

On 5/19 I turned all of my Facebook settings to the most private possible ("Custom>me only").  I was surprised to find today that what appears to be a new category just controlling what outsiders can see of my friends was turned to "everyone".  

I found this by creating a new Facebook account with a fake name so I could see what people outside of my network could see.  On a side note, I picked Ty Webb as my fake name.  Ty Webb is the name of the character Chevy Chase played in Caddyshack.  Can you believe there are over 700 Ty Webbs on Facebook and most of them have pictures that look exactly like Chevy Chase!

If you are a Facebook user I encourage you to go through this exercise.  I found it much more illumnating than the services that tell you what others can or cannot see.

Much to my surprise, I navigated Ty Webb to my Facebook profile and I could see my full list of friends, and could click through to see all of their friends.  In the past Facebook only presented a few friends and you could not click on them at all until that person had accepted you as their friend.

Interesting I thought.  After bolting down my friends (again), I thought I should have some fun with this -- you know -- now that I could see all of Mark Zuckerberg's friends without actually being his friend.  Turns out, Mark is just not very social.  He does in fact have a page, but it is a fan page, and I could not find a Facebook page for Mark.  He has over 500,000 fans -- but no friends.  And I was fool enough to think he would be leading the charge to share the names of his past girlfriends, ex business partners, and current investors and advisors and employees with all of us.  I could not see what web sites he had gone to, what he bought with his credit card, or where he was right now either.  Not a word about what he was working on, who he was having lunch with today.  Turns out Mark Zuckerberg is quite the private person.

Seems strange that he would want everyone else to share their identity information.

The Score on Facebook

The next week will be very interesting with regards to Facebook.  Here are a few things to watch:

People Quitting Publicly on a special site set up just for this purpose.

Not that any number of quitters will make a difference to Facebook's nearly 500 million total. But this was just 2,000 last week and this is just a sample of the true number of quitters.

People Giving Money to Diaspora on Kickstarter here.

These guys don't have anything going for them except having said they will build a competing system. So far?  $185,000!  (they wanted $10,000)

Later:  Mark Z. posts his response in the Washington Post.  

Physics, Nature, and the Rule of the Mob

Life is governed by the laws of physics, the laws of nature, and the rule of the mob.  Physics is "what goes up must come down". I don't know what the laws of nature are, but we say they have been violated when we see something really disturbing, so I am sure they are useful. And the rule of the mob is about to take down two companies we thought were invincible just a few months ago:  Goldman Sachs and Facebook.

There are undoubtedly books on the rule of the mob and I have not read any of them.  My description goes like this:  when a person or an organization gets to the top of the heap, it has to spend so much energy just staying at the top of the heap, that it cannot stay on the top of the heap any longer.  The timing of the process is highly variable, but the faster one gets to the top of the heap the more likely the mob will vigorously pursue a change in the hierarchy.  

Goldman Sachs got there slowly and stayed at the top for a very long time.  Most of us cannot even remember a time that Goldman was not at the top.  SEC Chairman Mary Schapiro was quoted in the Wall Street Journal on Saturday saying "If we don't get serious about this process, we may cease to exist." Goldman may own parts of the government, but this kind of resolve will be hard to overcome.  Who would you pick for longevity, the SEC or Goldman Sachs.  I go with the SEC.

Facebook blew past 300 million users to its current 500 million or so and its founder has turned down hundreds of millions of dollars to keep running it.  The tide is turning however and it is now cooler to quit Facebook than to use it.  The tech community turned against Facebook several weeks ago, and the rest of the mob will likely defect in the weeks ahead.  In fact there is a web site dedicated to this movement called Quit Facebook Day.

One interesting element to these actions by the mob is the lack of viable alternatives.  Goldman Sachs is probably not any more evil than any of the other firms on Wall Street.  Their unique crime is that they are just so good at taking their client's money.  Clearly market demand for a system we can use to organize our relationships on the web has driven Facebook to its current heights.  No clear successor has presented itself, although the mob is putting some weight behind the Diaspora Project, but four kids with an idea does not a viable alternative make.

If you are Mark Zuckerberg, or Lloyd Blankfein, you can be comforted to know that the crowd will only take you down a few notches and probably not out of the picture all together.  After all, your predecessors put you in good company.  Firms like Standard Oil, IBM, and Microsoft all fell victim to the mob.

Funny, my spell checker wants to replace "Zuckerberg" with "Boodsucker" -- even spellcheck has turned against him!

-image courtesy of www.thefirstreporter.com

 LATER:  NYT post from Friday about how the Web itself is a social network.

Facebook is Amway 2.0

Mark Zukerberg is the next Richard DeVos.  We know history repeats itself, and as we are seeing it right now as Facebook becomes Amway 2.0.  Both organizations provide tools to aspiring networkers, focus on counting things, and work to monetize the relationships to the maximum degree possible.

Aspiring Networkers

Both Amway and Facebook provide the tools and encouragement to build a network of friends.  Quantity of friends is more important that quality, and no attempt is made to value one friend more than another.  There are no best friends on Facebook or in Amway. 

Count Your Friends

Once in Amway you are encouraged to produce a list of your friends so you have a place to start building your network.  You are coached as to how to approach your friends, and suggestions are made about friends of friends.  The objective is to get as many friends into the network as possible.

We Make it Easy for You

Once you get enough friends into the network, you can work to sell things to them, or work to get them to sell things.  You can be a big success even if your friends don’t buy anything – as long as your friends of fiends do.

So the next time someone asks you to lunch to discuss a new “business opportunity”, make sure to ask:  is this Facebook?

All of this is not necessarily bad for Mark Zuckerberg.  After all, Richard DaVos owns a really big boat and the Orlando Magic.

Later:  Here is a good post by Robert Scoble about what Facebook should do.