broadstuff

Amazon has played IBM/Microsoft to Apple's..well, Apple in the Web Music space - and launched the MP3 version of the iTunes value chain in beta....must say I was quite impressed with the selection that was on it, its quite far off main stream America (or UK for that matter)

Key structural feature of interest is no DRM. It's going to be really hard for any DRM based play from here on in.......

Big picture though is that this plays out fairly typically in 3 main phases in a new industry in our space:

1. Total confusion of standards, no end to end services, crap user devices, lousy interworking

2. A player (Apple, quite often) comes forward with a proprietary end to end play, and proves the market. Having an iconic end device never hurts. Pioneers the market and gathers a core fan club

3. A more open play arrives, allowing more players to share the wealth and drives the larger main market.

Web Music is going into Phase 3, we are in Phase 1 in Web TV, and (in our opinion) moving to Phase 2 for mobile multimedia with the iPhone providing the shock to that value system.

It's also been picked up by GigaOm over here

One of the areas of great wrangling in the Mobile Web saga is The Business Model that shall emerge (more in a later post). But something that was definitely not spoken about at the Informa Mobile Web 2.0 conference when this subject was broached was (ahem) Porn 2.0........

Any observer of previous media, from papyrus to the internet, cannot but have observed that porn is an early adopter....and thus (in theory) one should be looking at mobile porn to see the patterns of emerging use. So, where else to go but to the blogosphere for a quick root around:

Jumptap notes that we are all, by and large, at it - searches as per April 2007:




And then there is the size question Wired, for example:

Bloggers and journalists have been all over a Yankee Group study released Monday that predicts a $1 billion global market for mobile porn by 2008.

On the off chance you missed the flurry, let me clarify. Mobile porn is not a big bus that travels to underserved rural areas a la mobile libraries or hearing test centers. Rather, it's the next logical step for adult content delivery.

Or is it?

On one hand, mobile phones are an ideal content receiver. We carry them with us everywhere we go, and we can send and receive data packets from just about anywhere, too. Despite dead zones -- which for some reason seem to include my desk and my bed no matter what city I'm in -- phone service is ubiquitous compared with wireless internet.

On the other hand, if you wanted to watch two or more people having sex, they'd have to be very, very small people to fit into a phone display. Even the Treo that I covet tops out at 320 by 320.

The iPhone has already been branded the iPorn by some wags...size clearly counts

Privacy is also an issue - Wired again

The whole point of a mobile phone is to escape the tyranny of the phone cord and talk while we're out and about. On the train, standing in line, walking down the strand at Venice Beach. That's the joy and the curse of cell phones -- we use them in public. And even when you think you're being discreet, you never know who might be looking over your shoulder.

Hmmm...I predict a run on these video glasses then....

According to Laptop magazine (that's top.....)

Indeed, mobiles are proving to be a potent distribution channel for adult entertainment; according to Juniper Research, the total mobile adult-content market was worth $1.4 billion in 2006. Formats range from interactive video and SMS chatting to explicit wallpapers and adult-themed games.

Industry analysts believe mobile adult entertainment could be big. "We see the [global] market rising to about $3.3 billion by 2011," said Bruce Gibson, research director for Juniper Research. "That figure could actually double...we took a conservative view of this particular segment of the [mobile entertainment] industry," he added.

(So the entire Mobile Porn market is about 1/3rd of the putative value of Facebook.....hmmm)

However, MoPorn co's are keeping their heads down...at 3GSM 2007 for example

Mobile 'erotic entertainment' companies are thick on the ground at 3GSM this year, although the hall in which they are gathered is keeping a low profile. While many companies are making money from producing porn for handheld devices, very few are prepared to talk about it.

The bread-and-butter of the mobile porn industry is still SMS. Uses subscribe to one-on-one chat with a model (usually working in a call centre), but these are increasingly being sold a branded services with celebrity porn actresses.

"SMS pays the bills, but other formats are becoming more popular," said the representative of a mobile erotica company who wished to remain nameless.

"Wallpaper is getting bigger, but movie loops are the future. Very few people are going to sit and watch a whole film on a handheld, but they will pay for a clip."

And then there is...er....user generated content:

The representative added that the increasing integration of camera technology in phones is already making porn a Web 2.0 player.

However, Porn has caused the rise and fall of more than a few good men - Amp'd for example in July 2007

Aside from the still very valid questions about how Amp’d blew $360million in funding and ran up $100million in debt, there are now some interesting questions as to why a company primarily marketing to teens was producing X-Rated content.

Teens interested in X rated content - who would have thought.....

And then the age old question - what do women want?

One question that remains largely unanswered is whether mobile adult entertainment will attract more female consumers, who traditionally are quick to adopt mobile services. "Being a woman in the industry, many people have asked me what mobile erotica would be for women and if I have any intention of doing something," said Julia Dimambro, director and founder of Cherry Media. "To be perfectly honest, I still don't know what that would be. Creating a compelling proposition for erotica on mobiles for women would need to go beyond the 'hunk wallpaper' or a video clip of a fireman playing with himself." The two initial ideas the company has played with are erotic stories and chat. "We see a lot of women access our 'Male' SMS chat services for example, so there is obviously an interest out there."

At the conference it seemed like you couldn't make a speech without mentioning Twitter or Jaiku etc, but maybe people have missed the plot, and its Twatter (who are you doing now) that they should be talking about

...have been at 3 conferences in last 2 weeks, and in each one I made the point that the New Media model is consumers pay for handset and distribution costs via upfront + subscription/payg, and for content / aggregation via advertising (and very reluctantly any other way).

All that's happened is we are paying someone else to distribute the content now, not the mainstream media.

I just assumed it had been blindingly obvious for 10 years, because it was certainly known in Web 1.0 - but lo, people came up praised me on my "insight" each time.

I thought they were just being nice....and then I read this from a very respected blogger and new media analyst (Scott Karp) written but a few short days ago*:

I read this article about the rise of free daily newspapers in the US and had a sudden realization about the perceived failure of news organizations to charge for news online. The New York Times has torn down the TimesSelect pay wall — does that mean that reading TimesSelect content online is now FREE?

What I realized is that, actually, it’s NOT free. To read the New York Times or any other newspaper online, I have to be connected to the internet — and that, in most cases, is definitely NOT free.

Same thing in the comment base - praise for amazing insights etc etc. Not just me then.....

Sorry, but if its taken this long for "Meedja" people to "get it" (and still not all do it would seem) then they are all in deep, deep cr*p sans shovel.

As Scott Notes:

What needs to be reinvented is the economics of content CREATION, which has been cut loose from the economics of distribution. Fewer and fewer people are paying news organizations to distribute news — so they need to find a model that pays strictly for the creation of news.

That is…unless news organizations can once again become hubs of distribution — a destination for consumers to access a rich package of information. Right now, most news organizations are merely offering the same package of information online that they do offline — but the web is much, MUCH bigger than that.

Correct - we have been doing a lot of interviewing recently with media companies about the rise of broadband media, and a comment from one guy in a MSM content company was very perceptive - in essence it was:

We have to figure out what (MSM) does best in this new world, and what Web TV does best - and then to stick to what we each do best.

And that is the challenge - we don't yet know what "we do best" is.

*tip of hat to Seamus McCauley for the link....

Got an invite in the mail from a friend who has just joined Digg profiles in its new SocNet guise.....used it as a reason to have a better look (have been on digg some time just to post stories).

Well, 1/2 hour later of pure frustration - they can keep it. Here's why:

(i) If you don't have a blog from a standard platform forget about adding it, it wants far too much detail than is necessary (Broadstuff uses Serendipity open source, hosted by a commercial hoster - digg wants Broadstuff's username and password. Are they nuts?)

(ii) Ditto importing email addresses to create a buddy list via Thunderbird (won't read a Thunderbird ldif address file). Imports AOL or Hotmail though (who uses those if they are serious email users?)

These are basics. I tried to set up a new profile to see if that would help - data required is now more intrusive (dob, address etc), and you can't cancel the profile anywhere as far as I can see.....odd that.

This was all set up very simply on Facebook btw - took me a few minutes. This took about 5x longer to get nowhere. I could be missing some arcana, but its not obvious and frankly I don't have the time or interest to sort it. And that's what is most disheartening...I really, really wanted to see an alternative to Facebook, but this isn't it yet.

Just when you thought it couldn't get sillier - the Wall St Journal reports that MSFT is willing to shell out $500m for 5% of Facebook (valuing it at c $10bn) whereas F/B is reportedly more keen on a $15bn valuation.

This is exactly like the 3G licences again - what you have to believe in order to think the average customer is worth that price is at best irrational, and thus the deals are being based on "strategic reasons" - aka Deal Fervour.

As Warren Buffet once noted:

“[When] a C.E.O. is encouraged by his advisers to make deals, he responds much as would a teenage boy who is encouraged by his father to have a normal sex life. It’s not a push he needs.”

So...a bit of fag packet maths here - $10bn valuation, assume it gets to MySpace's size today before the next New New thing comes along in 3 years, that's say 120m users so its around £10bn for c 360m useful user-years before it goes the way of all SocNets (40 + 80 + 120 +80 + 40) - say $30 per user per annum - or $45 at a $15bn valuation.

US GDP is about $13 trillion, Adspend as % of GDP is about 2.3% (say c 300bn), population is c 300m - ie the US forks over c $1000 per capita per annum in advertising.

Facebook needs $30 - $45 per user year at this valuation, ie 3% - 5% of all that US Adspend per person - problem is the entire Online Ad industry is only about 7% of that pie now, will be c 10% in 3 years time, maybe as high as 14% - so F/B needs between c 25% and 50% of all Online Ad revenues per head for its customers to cover that valuation (more in fact as US GDP and % of GDP to Ads is higher than RoW).

Even if you assume Facebookers are worth 2 x the US mean for Adspend, its still a big ask.

Now, more playing with numbers - Web 1.0 Bubblemeister Henry Blodget forecasts these revenues for F/B

2007: $150 million ($200 million? $250 million? Who cares?)
2008: $750 million
2009: $1.5 billion

Assuming that ARPU does not increase hugely, that assumes a 10 fold increase in customers - ie F/B goes from 40m users to 400m users in c 3 years. At MySpace levels of ARPU (about double Facebook's) thats a "mere" 225m or so users. Well, the population of Planet Earth is only an order of magnitude higher than that, so that is still one huge ask, especially given that there are increasingly loads of other SocNets out there. One can believe that ARPU will go up (MSFT clearly does given the valuation), but there are still macroeconomic limits - $1.5bn of Ad revenue is still c 0.5% of total Ad revenue, its still c 3% of all predicted global online Adspend (c $45bn by 2011).

And we have to ask "what is a user" - if experience of other SocNets is anything to go by, many of those users are pretty dormant, there will be multiple signups etc - 1 in 10 is probably a more useful estimate of actual cruisin' users, which make the valuations even harder..

Oh, and if they must do the deal try not to give the kids all the loot in cash up front, like certain others have done....

But the question remains - how can you pay (implicitly) $10bn for a company with projected revenues of c $2.3bn before it is in real risk of falling away as the next thing comes up?

And that $10bn is about 9 - 12 months of Microsoft profits eaten up as well, just to give a feel for dealsize - no problems there in digesting it then ! Even Google looks more like it wants to build rather than buy. And to buy 5% of an entity - that's zero control......hmmmm, the only people who will pay this are "us" methinks - do I smell an IPO in the offing

Postscript - I read this post by A VC (Fred Wilson) with a mounting sense of amusement:

I think the valuation, which many are focusing on, is not the issue to pay attention to here. The $20bn valuation that Google paid for AOL wasn't a real price and the $10bn valuation (or more or less) that is being discussed isn't real either. By "unreal" I mean that it's unlikely that financial investors would pay that price or that anyone would pay that much to buy the entire company right now.

Fred quotes Yogi Berra elsewhere in his passage, but I felt it applied more to his argument above....the valuation is totally the issue as from it stems all resulting behaviour....seems like deja vu all over again

From Ars Technica:

......the growing backlash against DRM is causing dissension in the pro-DRM ranks. Paul Sweeting's excellent report on the DRS conference records the frustrations of the DRM community at the tactics of the content industry. They apparently feel that an overzealous content industry is abusing DRM; this is a bit like Smith & Wesson complaining that bullets can kill.

When DRM proponents start pointing fingers and attempting to separate the theory (really, the ideology) from the practice, we have to stop and ask: what's going on here? It appears that players in the DRM ecosystem know the tide is turning against them because DRM is punishing the wrong people, namely the folks who are buying DRM-laden content. This is bad for their business, because a DRM backlash could harm DRM peddlers.

We'd agree with Ars T that the backlash is coming....in fact its already started in that now most people see piracy as an acceptable approach in the face of industry actions. But straws in the wind (see our posts here and here for example) from large media companies also indicate they see the onrushing backlash train....

Hold on to your seats, this is going to be bumpy ride - but the endgame is not in doubt. The industry will eventually have to make peace with its own customers, and craft usage rules and prices that dissuade the majority of people from adopting the piracy business model. Banning and Prohibition have never worked in the past and in this networked age it is even less likely to work now.

From the BBC

Computer enthusiasts in the developed world will soon be able to get their hands on the so-called "$100 laptop". The organisation behind the project has launched the "give one, get one" scheme that will allow US residents to purchase two laptops for $399 (£198). One laptop will be sent to the buyer whilst a child in the developing world will receive the second machine. The G1G1 scheme, as it is known, will offer the laptops for just two weeks, starting on the 12 November.

This is potentially very disruptive, in that:

(i) The economics make it attractive as a ubiquitous device in the OECD

(ii) OECD takeup means the production costs should fall to $100 and below even faster, thus helping the developing world. It has yet it has not reached the $100 number, in fact prices went up from $175 to $188, leading (apparently due to nickel costs, though some wags say its the extra gear needed to run Microsoft OS) but with large OECD volumes and a 72% learning curve (fairly typical in large batch manufacturing) the price gets to $100 in 2 years.

(iii) A large penetration in the OECD would launch a new wave of innovation for the device

(iv) Its an interesting device in its own right - it has WiFi, a flash drive, a sunlight readable display so that it can be used outside (the above picture shows it in eBook mode). It has no moving parts, can be powered by solar, foot-pump or pull-string powered chargers and is housed in a waterproof case. There are a lot of applications in an "Enterprise 2.0" world as well as home and leisure environments one can imagine it being used for.

The laptops will go on sale for a week through the xogiving.org website or by calling +1 866 XOGIVING (US number). If it is successful they will manufacture more for the OECD.

Postscript - good heavens...the New York Times has the story too, only 10 days later

Hats off to Dave Winer for calling the semantic shift from Social Network diagram to "Social Graph" a bit of monkey business. It just causes unnecessary confusion as the nomenclature is already defined - Scale Free, Small World networks for example.

Like many people I suspect, I was irritated* by its use when I read it, and just decided not to use the term - but if I can add a vote to keep the Social Network term, then here it is.

For at least 10 years I have known the representation of a social network on paper etc as a Social Network diagram (sometimes map) - why is that no longer appropriate?

Seems like he's in good company btw - Nick Carr agrees as well.

Postscript - even Facebook, the erstwhile Social Graphologers, use the term Social Network in their patents - could this all be about publicity then - surely not

*Note - another reason for irritation - as Dave Winer puts it..."Another problem with new names for old things is that it tends to push aside the pioneers and makes it sound like newcomers are not also-rans."

...was the title of last night's London Social Media network meetup hosted ably by Lloyd Davis and Richard Stacy

Its a very timely question - in essence the Andrew Keen "cult of amateurs" view is that (to quote the man)

There are all sorts of parallels between the contemporary history of media and fashion. Both are seducing all of us. Wearing Hermes makes us feel exclusive; authoring a blog makes us feel powerful. But the consequence of each is the stripping away of quality. As Dana Thomas argues:

“The luxury industry has changed the way people dress. It has realigned our economic class system. It has changed the way we interact with others. It has become part of our social fabric. To achieve this, it has sacrificed its integrity, undermined its products, tarnished its history and hoodwinked its consumers. In order to make luxury ‘accessible,’ tycoons have stripped away all that has made it special. Luxury has lost its luster.”

Replace "luxury" with "truth" and you've could be describing the blogosphere:

In order to make truth ‘accessible,’ the Internet has stripped away all that has made it special. Truth has lost its luster.

Conversely, the "Wisdom of Crowds view" is that, given sufficient heterogeneity, a clear enough point of discussion, and independent decision making then a large number of individual agents will make individual decisions, the mean of which is highly accurate.

After a short paper from Richard outlining the basic thesis and conditions of both sides of the argument, the discussion started off with some fairly topical issues such as whether the MSM or the Blogosphere had called some big current stories better - the Northern Rock one, and a few other current stories too - and thus the scene was set for what promised to be a lively evening.

It also started off as quite interesting in that the bloggers in the ensemble didn't really recognise MSM's view of the blogosphere, and the Journos didn't recognise the blogosphere's view of the MSM. Stereotypes eh...

We broke into 3 subgroups, looking at:

Media vs Medium - will social media really subvert msm, or is the Keensian world just the bleating of a group who until recently were gatekeepers to a restricted asset?

(An observation here: those 3 preconditions for crowd wisdom - heterogeneity, clear point of discussion, and independent decision making - are pretty useful criteria for thinking about MSM as well here. How heterogenous are the contributors, what is the spin tendency, how independent are they? If no better than the blogospheroids its hard to understand that there can be any value add - in other words, for the MSM to be "better than" the blogosphere it probably, strategically, needs to have a "flight for quality" all of its own* )

Does Size matter - the impact of size of crowd on its "wisdom"

(An observation here too - as well as size, network theory has a lot to say about the type of network design and the amount of "noise" it generates. Highly interlinked networks generate a lot of noise, more hierarchical ones far less. Of course with hierarchy comes less signal as well)

Quality - how do you find quality material and qualified sources in the new media.

I went for the Quality group as the other 2 areas are fairly familiar terrain whereas my instinct tells me that this is where the game will be won or lost - lots of very interesting questions raised, my big takeaways were:

(i) Defining a way of getting "trusted authority" on a subject in social media is very necessary - but non trivial! People with big reputations in one area can fairly easily push into areas in which they are far less competent, any rating system can be gamed, aggregating the views of the "silent majority" of long tailed small voices is harder than tuning into a few big voices.

(ii) Defining how that trusted authority would be used in working out a "wisdom of crowds" scenario is also non trivial - there was an interesting view that we may have to have trusted "channels" so you know what you are getting. And it turns out that traditional authority markers are not always right - insights often come from outsiders, insiders are frequently in-bred in terms of ideas.

(iii) To think that the blogosphere is immune to the ills of MSM - influence, spin etc etc - is touchingly naive - if anything the disproportionate impact of "A listers" and their huge fanboy networks can push fairly unrepresentative views quite far.

(iv) The blogosphere is not a few channels, its tens of thousands, with quite large lumps of extremes on any one topic, so discerning the "wisdom of crowds" in all that data is very hard. (very true - its one of the applications of the Memetic Difference Engine we built for the BBC Innovations Lab)

It was also good to meet bloggers whose blogs I have read before, and some of whom I hadn't.

Thanks also to Ian Fenn for explaining the evolution of the New York Chinese dish General Tso's chicken. Ian's site is actually typical of that blogosphere gem, the "pro" amateur authority who is passionate about their interest and does it for love.

In short, if the blogosphere can find a way to find sites like Ian's, and keep them bobbing above the sea of PR, spin, SEO gaming, link farming etc then it will win. If not.....then its just a rush to the lowest common denominators......

(*By the way, I don't know if anyone watched the continuation of Question Time on News 24 blast night - interesting hybrid, asking another panel the far tougher questions the blogosphere asks as standard.)

On Wednesday I was on two panels at the Informa Mobile Web 2.0 event, those being the the ones on standards in the mobile industry, and the wrap up one on what comes next in mobile. The latter was on the future of mobile overall, but so was the former, in that unless Planet Mobile (today's operators and device makers) can sort out a better level of standards integration, they may not have a future.

This post is the first of two on the Future of Mobile Web 2.0 (needs a TLA - FoM 2.0 ?), and deals with the Standards issue.

To explain this issue, its best to give an example - several years ago we were asked to closely examine a piece of technology in BT labs that was built to allow a piece of application software to be written once, and it would then adapt it for the multiplicity of variations to allow it to work on the plethora of standards and adaptations which was the mobile delivery chain then. Quite often the same software would not work on the same phone in different operators' systems.

Roll forward 5 years, and that piece of software is now rolled out as a company (iO), and in the interim we have undertaken a number of studies for mobile companies - in mobile advertising, mobile music, and mobile TV (we gave part of the Web 2.0 Monday workshop on Mobile TV - see a short writeup here) - and guess what - not much has changed! People still tell us it's near impossible (or at least economically not feasible) to write a piece of software that will work with any phone on any one operators' network, or that will work on the same phone on different networks. In fact its become worse - for mobile rich media (Music, video, TV) there has been an explosion of (non) standards from how to store the media, through its distribution, to rendering and on-board operation - so for eg you can't even guarantee that DRM will work the same way - if it works at all - on any two phones.

(probably as good a reason as any to drop DRM actually....)

So why does this matter so much - why is the FoM 2.0 at stake? There are 3 main reasons.

(i) Strategic economics today - we are continually told that there are twice as many mobiles on the planet as PC's and that it will be the "internet device of choice". This statement is disingenuous (aka bollocks), because it is not a homogenous market - as far as making them all interwork its a digital Tower of Babel. With the exception of Far Eastern countries where an end to end standard has either been decided by an industry body (eg Japan) or government (eg Korea), this much vaunted market - from a service providers point of view - is actually a very large number of subscale markets with high entry costs, that no-one can afford to build value for.

(ii) Strategic economics tomorrow - players we talk to for mobile TV tell us its just too damned hard and expensive to make mobile TV work reliably, and they will run with Web / IP TV approaches for now. The risk for planet mobile is that these players stick with Web TV, or - even more threatening - the Web TV goes mobile via WiFi, WiMax et al.

(iii) The lack of a Future for todays' Mobile players - it can't have escaped anyone's notice that people like Google and Apple have looked at the failings of the existing players, and the size of the potential market, and have started to make their own plays - the iPhone bei ng just the latest in quite a long line of ventures into the space.

The history of technology standards is interesting by the way - traditionally standards were defined "de jure" - by industry groups or by some form of edict (as happened with 2G in Europe, in Japan with DoCoMo, and in Korea with mobile TV), or - more typically - de Facto - in that a specific player's approach was used by the majority of consumers and it won. At the moment nearly all the players seem still to be trying to get "their" stuff to be de facto standards, rather than collaborating in any meaningful (ie shape changing / material / useful) way, and the customers are just ignoring them and doing mobile multimedia internet "stuff" in all sorts of other (bypass) ways.

Mobile today (to me) looks exactly the same as PC networking did in about 1983 - multiple types of PC, a variety of operating systems, multiple different network topologies (anyone recall token passing, cambridge ring etc), virtually no interoperation of peripherals etc etc. Back then it took Apple to define what a PC should look like, and then IBM/Microsoft to set a de facto standard. (And the open DARPANet eventually beat all the closed OSP models)

In fact, when one looks at the major innovations over the last few years in mobile from players traditionally outside of Planet Mobile, its easy to come to the conclusion that Planet Mobile is not really capable of reforming itself*, and probably needs an Apple type play (from Apple no less) - and a Microsoft/IBM play- to sort it out.

It will probably take something like this today to save Planet Mobile. In fact, this could be deja vu as Apple now seems to be doing for mobile multimedia what it did for microcomputers 25 years ago....

Of course, pricing and closed systems don't help either....and nor do attempts to de-standardise the Mobile Web like this.

(*As an aside, some friends inside certain handset manufacturers tell me they are delighted with the Apple iPhone, as it allows them to go back up their management chain and say "See - I told you we needed to build stuff like that)

Addendum - a post on mobile monday London wondered why I hadn't talked about the industry standards bodies - my post was aimed at a high level but its an oversight, I accept. Here is our take:

There are a number of mobile standards bodies - Open Mobile Alliance (OMA), 3rd Generation Partnership Project (3GPP) , World Wide Web Consortium (W3C), and also .mobi. The question asked of them all though, is do they have the influence to "knock heads" together sufficiently to allow the industry to standardise itself - or will it take outside pressure? Evidence to date from other industries (some with the same players) is that there is often a prolonged attempt to run with proprietary or conflicting standards until either competition declares a winner, or it becomes economically better to collaborate. Evidence in the mobile multimedia space would tend to suggest this scenario will play out. The problem is also that a whole raft of standards need to be interworked across the end to end delivery channel at once for rich mobile services to work easily.

Or one could just leave it to Apple to define a standard-set and let its approach become the de facto approach

Postscript - Scott Karp has noted 5 reason he hates the mobile internet - in fact they all derive from the above - in countries like Japan and Korea which ave end to end standards, his problems do not occur.