The big news this week is Facebook’s announcement that it would take the company public, in one of the largest offering in history, raising an expected US$5 billion in the process. As this is the largest tech IPO since Google, it is time to run the number and assess whether similarities or difference exist when it comes to base numbers. What appears there seems to justify the $75–100 billion valuation some see the company getting at IPO while providing a few points of concerns about the future growth of the company.

The topline numbers

The first numbers everyone is looking at are how much the  company is raising, how much it’s making and what its profitability look like. If we compare the 12 months preceding the offering for Google and Facebook, the picture looks like this (all figures are in thousands of dollars, unless otherwise stated):

Looking at those numbers, the Facebook IPO seems relatively cheap compared to the amount of money Google was looking to rise when it went public. However, since we don’t know how many shares Facebook is looking to sell for those US$5 billion, it is impossible to assess how much the company should be priced at.

Using Google’s market cap at its strike price and at the close of its first day, we could look at the multipliers for revenue and net income as possible hints as to how much Facebook could be valued at on its first day:

So if revenue and income were to be considered as the only indicators for what value to give Facebook, the valuation range of US$75–100 billion for the company doesn’t seem totally incredible. However, one would have to consider whether Facebook could grow its revenue at the same rate as Google did. While it starts from a substantially higher number, it also means that the company is probably in a more mature stage and may not be able to grow its revenue at the same speed as it has in the past.

Revenue

While Facebook’s revenues are impressive, we should see how they break down in order to get a better sense as to whether a comparison to Google makes sense. Digging into the S-1, we find interesting numbers such as the percentage of revenue that comes from advertising, the percentage change from the prior year’s ad revenue (and from the year before that, giving us a sense of what growth looks like) and highlights as to the percentage of revenue coming from significant external parties. I’ve summarize this data in the table below (dollar values are in thousands):

While Facebook’s ad revenue are substantially larger than Google’s were at IPO time, its reliance on advertising is 10%, showing that the company may be more successful as diversifying its revenue base. This appears to be a good thing as the last 2 years of ad revenue growth seem to have been slower than what Google was experiencing when it went public. Another sign that we may be dealing with a more mature growth curve when it comes to the company’s ad revenue is the fact that it seems to have already been fairly successful in ensuring that its revenue base was no longer just a US one, with only 56% of its ad revenue coming from the US, while Google was deriving 74% of its advertising revenue from the US when it went public.

Much has been made about the mention in Facebook’s offering that it derived 12% of its revenue from deals with Zynga, the company that has successfully provided a number of games for the Facebook platform. However, one must realize that such reliance on an external party is not so unusual and that Google was warning that 21% of its ad revenue were generated by managing the ad inventory of external partners.

So all and all, the revenue picture for Facebook looks pretty strong but advertising revenue may be decelerating, with question as to whether the other sources of revenue are growing at high enough a speed to counter that deceleration.

Costs

On the other side of the financial register, one has to look at whether Facebook is as efficient on managing costs as Google was when it went public. Fortunately, here again, the S-1 filings provide us with usable data (all dollar figures in thousands):

The first thing that jumps out when looking at those numbers is that Facebook seems to pay substantially more for its revenue than Google does. In fact, if you look at the multipliers on cost of revenue (7.06 times) and actual revenue (3.86 times), it seems that it takes almost twice as much for Facebook to make a dollar as it did for Google when it went public. Some of this has to do with R&D costs, which are substantially higher as a function of revenue than the ones Google had at IPO time. Sales and market and overall costs and expenses seem to be lower, as a function of revenue, than Google’s were at the time of its offering. This may be a sign of an organization with more mature cost control metrics.

Keeping an eye on the cost of revenue may be an important factor in assessing where Facebook is heading revenue wise. If that number keeps rising, the company’s margin may erode, making it a less attractive business. In its offering document, the company is reporting a US$.43 net income per diluted share: this is slightly better but mostly comparable to the US$.41 per share Google had reported in its offering documents.

How much revenue per employee?

Both filings provide information as to the number of employees each company had. When it filed to go public, Google had 1907 employees; by comparison, Facebook had 3200 as of its filing. This is a useful number as it allows us to compute revenue per employee, a common measure of how effective a company is. When it filed, Google was making US$504,391 per employee; by comparison, Facebook is making US$1,159,688 per employee.

This is pretty significant as Facebook appears to be making twice as much revenue per employee as Google does. But how profitable are each employee?

Using the same approach, we can find out that Google made US$55,400 in net income per employee when it filed while Facebook makes US$312,500 in net income per employee as of this filing. This is a pretty impressive number but it is in league with what Google makes today (US$336,297 as of a year ago) and ahead of the rest of the computer industry, with the exception of Apple and Google.

If we were to look at Facebook by this measure, it most definitely earns a spot in the US$100 billion market-cap club.

Methodology

For the purpose of getting this data, I pulled all the numbers from the respective S-1 documents for Facebook and Google. Because the numbers in Google’s S-1 were in thousands and the numbers in Facebook’s S-1 were in millions, I have normalized all numbers to be in  thousands. All numbers were pulled directly from the respective S-1 filings or computed from the numbers I’ve exposed.

Conclusion

I’ve looked at a number of ways to quantify how big Facebook is from a financial standpoint and compare it to what was the last IPO of this scale in the tech world. The Google IPO was the launch of a company that had been dominating a large part of the discussion in tech circles over the previous 5 years. The same is true of Facebook, which has managed to grow from a project in a Harvard dorm room into a company that is serving around 800 million people. From a metrics standpoints, this company also appears to have a very strong business that compares favorably with other tech giants and the numbers bandied about in terms of valuation do not seem to be particularly outrageous when put in the greater context of the rest of the industry.

Of course, this does not mean that it is a business that is guaranteed success in the future. Some questions still remain around the cost of its revenue and the company’s ability to continue on the same growth curve as it has in recent years.

If you were to ask me if the Facebook IPO represents a new level of froth in our industry, I would be tempted to say that, based on the core numbers, that does not appear to be the case.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Facebook IPO vs. Google IPO. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

With a new year kicking in, it’s time for a new batch of predictions.

Business

One of the easiest predictions to make is that Facebook will go public this year, and it will manage to do so in a very successful IPO. I suspect that this may actually be the high watermark for the current boom cycle as Facebook is the most successful of the companies that were born of the Web 2.0 cycle. In a fashion similar to what happened with the Netscape IPO in 1995, the Facebook IPO may create a small window of opportunity for many other companies to go public.

On the private end of the spectrum, I think we will see the following companies see some form of liquidity event via either acquisition or IPO: Twitter has a strong chance of being acquired by Apple, which will quickly merge the offering into all of its products; Another possibility is that Twitter and Tumblr merge to create a mico-blogging powerhouse spanning both ends of the country. Meanwhile, Foursquare will either IPO or be acquired by Facebook or GroupOn in a share-only deal. Meetup will go public, creating another great story for the New York technology scene.

When it comes to Google, we will see the company continue its integration of Google+ into everything it does, with the biggest impact being the move to migrate all Orkut users to the new service. This will create an outcry in countries like India and Brazil, where Orkut has been popular but will leave many in the American media to wonder what the big deal is as Us customers have mostly left already.

Meanwhile, a lot of the companies that went public in 2011 will meet some strong headwinds as the rigor of the public market make it much more difficult for them to maneuver. Expect some changes at GroupOn and Zynga, with many people questioning their business models and long term viability.

Media

For a couple of years, there’s been a slow ramp up to the integration of the Internet with television. The rise (and to some extent fall) of Netflix, along with the entrance of new players like Hulu and Amazon, have made video distribution on the big screen one of the areas where the Internet and television have already intersected.

However, other areas of interaction have, so far, not been quite as successful. Apple is still treating AppleTV as a hobby, Google has mostly failed so far with GoogleTV, and other players like Roku and Boxee have, to date, been only adopted on the fringe.

In 2012 all that changes as the TV screen takes center stage in a way that a new generation of smart phones arose after the 2007 iPhone announcement. First of all, we will see some increased standardization around how to deliver content to TV screens, with agreements from TV set manufacturers like Samsung, Panasonic, Sony, and Vizio agreeing to some level of standardization. Apple will also announce a large screen product it will position in the TV market: The set will have AppleTV’s technology built-in, be accessible over WiFi, and connect directly to the iTunes store as well as integrate with the iPhone and iPad and other Airplay compatible devices. The set will run iOS and will be managed by a remote that runs on iPod touch, iPhones and iPads.

Meanwhile, cable companies will start opening up their platforms with some software development kits allowing to access content on the set top boxes they use. Once the Motorola acquisition is completed, Google will start transitioning the Motorola set-top boxes, which are a large part of the cableTV market, to GoogleTV, increasing the footprint of the service in the marketplace. Along the way, we will also see GoogleTV become more streamlined and less ambitious, focusing on delivering Android apps to the big screen instead of trying to rebuild the whole TV industry.

The concept of cord-cutting will continue to gain support but will not yet jump into the mainstream consciousness. With shows now being available exclusively on the likes of Netflix, we might see some interesting positioning whereas some TV carrier will offer Netflix as a premium service.

Politics

Social media will dominate the political cycle in 2012, with Twitter, Facebook, YouTube, Tumblr, and Meetup becoming part of the political operative tool belt. However, traditional electoral models will continue to be disrupted by the rise of distributed networked organizations like Occupy Wall Street, Wikileaks, or Anonymous. Except those players and new ones built on a similar model to have a substantial impact in terms of registering new voters and getting those voters to the polls in elections in Europe, the Middle East, and the United States.

In the US, the 2012 electoral cycle will see Republicans select Mitt Romney, a candidate most of their electorate is not very excited about, to run against Barack Obama. With the unexpected support of Occupy Wall Street and its splinter organization, Obama will win re-election as issues around economic disparities and job creation continue to be big topics of discussion.

In Europe, expect to see incumbents toppled in many countries: with major elections coming up in France, Spain, Russia, and Finland, it is possible that we will see a major change in political alignments across most of Europe, along with an increase chance of protest in those different countries. In Russia, in particular, we may see the internet play a crucial role in organizing protest if there are questions regarding voting irregularities.

The continuing protests in the middle east region may also lead to substantial changes in governance in several countries including Bahrain, Syria, and Saudi Arabia. During the presidential elections in Iran, we will see increasing clampdowns on internet sites as the government tries to shut any means of communication available to large groups of protesters.

… and of course, the easiest prediction to make is that the media industry will continue to push for more restrictions on the Internet, leading to more activists pushing back.

Technology

2012 is going to be an explosive year for technology.

First of all, we will see HTML5 roaring back, as many companies realize that it is cheaper to build in HTML5 and that the gap between platform specific code and HTML5 is shrinking. The introduction of WebGL, and proper implementation of geolocation and caching within mobile devices will give developers the ability to develop applications in HTML5 that can rival some of the offerings of native code. This is a move that will be resisted by platform makers like Apple and Google as it will loosen their stranglehold on their respective platforms; however, the split side of this is that effort is that some large companies will look to free themselves from said control by creating HTML5 instances of their own products.

On the mobile end, the Microsoft/Nokia will get some real traction with Windows Phone becoming a strong third player in the mobile market. Apple and Android will continue dominating the market with Microsoft still being a distant third. RIM’s position in the market will substantially worsen and will either be sold or go into bankruptcy.

Enterprise cloud strategies will continue to grow, leading to a growing divide between companies that can get efficiencies through the use of cloud computing and companies that are kept by different regulatory frameworks from being able to realize the financial gains offered by such model.

3D will be a hot buzzword, with the introduction of consumer-oriented 3D scanners and 3D printers that will push the idea of scanning and printing your own plastic parts. This will lead to some controversy around the concept of 3D objects piracy popping up in the media, with little actual evidence to back those fears. On the 3D projection end, we will see the rise of designer 3D glasses and the first glasses-free 3D television hitting the market, as we as a few consumer-grade 3D cameras. At the same time, we will see more and more technology to upscale 2D to 3D, in an attempt to develop a larger consumer market for 3D technology.

On the PC end, netbooks will disappear as a category and the hot new trend will be to offer thinbooks that mirror much of what Apple is offering with the Macbook Air product line.  Solid State Drive will aso increasingly become standard on new computers and we will see Apple actually announce they are getting rid of traditional hard-drive in all their product offerings. This will lead to their being able to announce that all their hardware can now run for at least 7 hours on a single charge.

Any which way, we will be revisiting those predictions at the end of the year and see how well (or badly) I did. I wish you, dear reader, a very happy new year and look forward to a continued dialogue in 2012.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 2012 Crystal ball. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

A small christmas diversion (sang to the tune of “The 12 days of Christmas”):

On the first day of Christmas
my social web gave to me
A like and a retweet too

On the second day of Christmas
my social web gave to me
two instagrams
and a like and retweet too

On the third day of Christmas
my social web gave to me
three vimeos
two instagrams
and a like and retweet too

On the fourth day of Christmas
my social web gave to me
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the fifth day of Christmas
my social web gave to me
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the sixth day of Christmas
my social web gave to me
six klout perks
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the seventh day of Christmas
my social web gave to me
seven HN upvotes
six klout perks
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the eighth day of Christmas
my social web gave to me
eight reddit comments
seven HN upvotes
six klout perks
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the ninth day of Christmas
my social web gave to me
nine quora thanks
eight reddit comments
seven HN upvotes
six klout perks
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the tenth day of Christmas
my social web gave to me
ten wordpress entries
nine quora thanks
eight reddit comments
seven HN upvotes
six klout perks
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the eleventh day of Christmas
my social web gave to me
eleven google +1s
ten wordpress entries
nine quora thanks
eight reddit comments
seven HN upvotes
six klout perks
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

On the twelfth day of Christmas
my social web gave to me
twelve youtube videos
eleven google +1s
ten wordpress entries
nine quora thanks
eight reddit comments
seven HN upvotes
six klout perks
five foursquare badges
four tumblr links
three vimeos
two instagrams
and a like and retweet too

Happy holidays.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 12 days of Social. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The tech world is abuzz at the news that Google may start providing cable television service in the United States but there could be several challenges to their efforts as incumbents may have issues with this intrusion and may block them by withholding popular fares.

Economics of the TV business

To understand the challenges Google may front in entering the cable TV business, one must first understand that TV is not a monolithic entity but an ecosystem, with players in a number of different areas. At the beginning of the chain are the show producers, who develop TV properties, either on their own or with economic participation from a distributor. Then there are distributors, what we traditionally know as TV channels, who package groups of TV shows aiming at a particular demographic segment and then offer this up to advertisers as a way to reach a particular type of audience. This is traditionally what people think when they think of TV.

But in order for those TV shows to make their way to the end users, they need to travel to consumers’ TV screens, which themselves are controlled by a different set of aggregators, who put together groups of TV shows in order to attract consumers. In order to do so, they must pay the TV channels what is known as a carry or transmission fee, which depends on the popularity of a TV station and is negotiated individually between those aggregators and the companies that own the TV channels. Those aggregators are often known as cable companies or satellite TV companies. But there are also what are know as the TV networks (the big 4 networks are ABC (owned by Disney), NBC (owner by Comcast), CBS (owned by Viacom), and Fox (owned by News Corp.)), which are aggregates of local TV stations who deliver their wares locally over the air and negotiate carrying on cable separately.

Over the years, there have been fierce battle between the content players and content carriers over such fees, leading, for example, to TV stations not being available on certain cable channels as pressuring tactics during negotiations. Part of the reason is that some of the content players are now also owned by content carriers, leading to situations where large conglomerates that own both carriers and creators look to get an advantage by forcing higher transmission fees on their competitors.

Who are the big content owners?

Outside of the big 4 TV networks, it is hard to find data about who the biggest players in the content market are. Part of the difficulty comes from the fact that most ratings are based on the concept of shows and not on the aggregation of those shows. Last year, The Daily Beast put together an interesting list of what they considered the most valuable cable properties in the USA:

Looking at this, an interesting trend emerges: it becomes pretty clear that there is a high level of concentration in the hands of a few players. Of the top 25 owners, the list looks like this:

 Who are the big content carriers?

The next question to ask in order to understand what other players Google would have to compete with in order to succeed in the TV ecosystem requires a look at the distributors. Outside of the big 4 networks, the list of the top 10 cable and satellite TV companies looks as follows:

What’s interesting here is that we start seeing some overlap between some content owners and content carriers. Comcast, Time-Warner and Cablevision all have channels in the top 25.

Owner and distributors

But then you have to overlay the TV networks to get a fuller sense of where we sit in the content landscape. So we look at whether companies own networks, cable stations in the top 25 or both:

So, of the top 4 national networks and top 25 TV stations, all networks are owned by large distributors who also have ownership of some of the most popular cable networks. Of the top 25 cable networks, a surprising 17 (68 percent) are owned by content carriers.

Why you can’t legally get content online

The current content carriers have been eyeing the internet with some level of worry as internet protocols tend to turn what they impact into a commodity: we’ve seen that scenario happen for landline phone service (VOIP won those out) and music (offerings like iTunes and Pandora, decimated the music industry margins); We’ve also seen many other industries get decimated by contact with the Internet. How many travel agency were closed as a result of online travel booking becoming easier? How many stock brokerage firms found themselves competing with inexpensive online brokerage accounts. The internet has become a great equalizer and many of the incumbents are seeing this as a potential problem.

This is part of the reason offerings like Hulu or Netflix do not include recent shows in their offerings. It’s also why Google may have a hard time in its negotiations with TV content owners. Their corporate owners would probably welcome Google with less than open arms. The general view in many of those companies is that they do not want to be discounted as mere pipes and they will use their hold on content to ensure that the most favored pipes the content is running on is their own. To see a new player enter the market is, to them, an unwelcome feeling.

A different approach

But that feeling is one that is largely out of touch with the times. Increasingly, content consumers are looking to the internet as the place to go for content and the bundling of pipes with content is losing some of its allure. The first level of aggregation being created there may, in the end, be a losing strategy as the price of carrying content will continue to drop and, eventually, one of the players in the market will be smart enough to realize that they can gain market share by offering a lower cost alternative to consumers. We’ve seen that scenario in other countries; For example, in France, Free has emerged as one of the dominant providers of phone, TV, and internet service, on such a strategy.

Meanwhile, the content owners (the channels) have to realize they are sitting on pretty hot properties and should start offering online streaming of their stations for a fee. Today, they charge the distributors, who pass the fee on to the customer. But learning about their end users could be valuable for them if they were to go to direct charging for online streaming.

In a world where the most expensive basic cable channels fetches $4.08 per month, a content owner could easily charge $7.50 per channel for online streaming and make as much money than they currently are.

Many people may think “how is $7.50 the same as $4.08? Where did the other $3.42 go?” In the scenario I envision, the other $3.42 would go to building out and maintaining the infrastructure required for online streaming. I deliberately went with a high number to dismiss the argument that costs are too high to justify such an offering. I suspect the number would be truly be lower and eventually could lead to a $5 per month offering (also, remember that most channels do not get as much money as ESPN does so their offering could be adjusted downwards too.

Today, customers are paying a premium for channels they may or may not watch. By offering streaming for a fee, content owner could open up a dialogue with end customers that lets the free market decide which channels live and which ones die. But today, those same companies are using near-monopoly franchises in one field (distribution) to subsidize another… and internet live streaming of their stations could threaten that monopoly.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title No live TV streams: Here’s why?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Will Google become the new Microsoft? Today, I present the case that would answer this in the affirmative.

A branding problem

Google has become synonymous with search and that was great for the company when search was its main business but with company growth came expansion into new markets like office suites, mobile, and video, the company may have a problem explaining what it brands stands for. John Battelle put it best last April:

you could argue that Google still means a great search environment. But the brand also means far more. It’s the brand which stands in opposition to the iPhone — the Android Pepsi to Apple’s Coke. The same is true in the office suite — Google Docs are the Pepsi to the Coke of Microsoft’s Office. Google Chrome? The Pepsi to Internet Explorer’s Coke. And there’s a ton more — photo sharing, blogging platforms, social networking, ecommerce solutions, enterprise platforms, media (YouTube, Knol, etc.).…well you get the picture.

And Google = Search doesn’t cover all that.

Google has grown to be much more than search in the same ways as Microsoft in the late 1990s had grown to be so much more than Windows and Office. And it is faced with the same difficulty of highlighting what its own brand stands for.

A messaging problem

Going beyond the brand, however, is also what sits at the core of Google’s message. Google’s mission, per its corporate site, is phrased as follows:

Google’s mission is to organize the world‘s information and make it universally accessible and useful.

Under this model, where would something like Google+ fit? What about Google chat? They are social tools that provide a lot of value and should be part of Google’s offerings but neither of those tools really help organize the world’s information nor make it universally accessible and useful (for example, isn’t the whole point of circles in Google+ to limit access to information instead of making it universally accessible?)

Similarly, in 1997, Microsoft’s stated mission of a computer on every desk and in every classroom had failed to envision the rise of non-computer devices and created an on-going perception of Microsoft as a computer-centric company. While it has made tremendous inroads in the non-PC world (example: The XBox), the company still hasn’t been able to shed the image of Microsoft as a computer company, which may account for its difficulties in adapting and telling the world about its tablet and mobile devices ambitions.

So as Microsoft is mostly seen as a PC-centric company with a little extra stuff, Google is seen as a search-centric company with a little extra stuff.

Microsoft has retooled its mission statement with a noble, if hazy goal:

Our mission is to help people and businesses throughout the world realize their full potential.

To be honest, I’m not sure of how the Xbox and its accessories fit under that mission but it doesn’t matter as people have failed to even adopt this concept as embodying microsoft.

Hard time getting heard

The challenge that arises out of this messaging problem is that when new products are introduced, the early adopters have a hard time taking the effort seriously while the mainstream still looks to consume those new offerings. For example, a fair amount of skepticism has arisen in the tech community regarding Google’s effort in the social media space. Google+ was first seen as an interesting toy but soon lost the mindshare of early adopters. However, Google has opened the doors to the public and is growing its social network at an impressive pace.

That Google is failing to articulate how Google+ fits into its overall business is but one of the challenges it faces. With Facebook and Apple as the new darlings of the media and digerati set, Google’s attempt to be a more “social” company has been ridiculed by many, present company included and it has made it more difficult for Google’s nascent effort to be taken seriously.

In the same way, Microsoft’s early foray into the gaming world was seen as an odd pastime but something that would eventually be killed as only companies with names like Sony, Nintendo, or Sega could possibly understand that market. A decade later, it seems clear that Microsoft’s move was a brilliant one, putting it in a strong position in a more consumer focused market and reaping billions of dollars as a reward for that risky move.

While Apple often positions its new offerings as a radical departure from anything that existed before, companies like Microsoft and Google have been more focused on presenting their offerings as an evolution of things they’ve done before. But because people’s perceptions are grounded in the company’s respective monopolies, they have a hard time seeing the transition and dismiss the efforts as flawed.

Assaulted on all sides

The late 1990s might have been the top years for Microsoft: it had successfully completed one of the largest operating system transitions in history, and was starting to show progress on its internet effort. Internet Explorer, then in its 4th iteration, was finally seen as a serious contender to the dominating Netscape browser (at the time, Netscape commanded an 80–90% market share) and the company unveiled the XBOX in 2001. On the dark side, an on-going anti-trust lawsuit made its way through the court system, eventually forcing the company to make some drastic changes.

The next decade, however, saw the rise of web-based applications, mobiles and tablets, making the OS a less important part of the technology stack and thus pushing Microsoft to become a less crucial player in the industry.

It seems this decade will see a similar type of history repeating itself for Google.

Its search and advertising business are dominant today but Microsoft has made in-roads with Bing, its own search offering. Meanwhile, Apple may obviate the need for Google altogether with Siri as it introduced a radical new way to handle search on a mobile device (and with the majority of Google mobile searches coming from iOS devices, the search giant has to worry about this intrusion).

On the advertising front, Google’s database of intention, which leveraged search results to better target ads to consumers is being rivaled by Facebook’s social graph, which leverages what the social network knows about people and their friends to offer a new form of advertising that could be substantially more personalized than anything Google could offer. Meanwhile, other players are leveraging the information sharing of users on networks like Twitter and Facebook to get a better sense of user sentiment and target ads accordingly.

On the mobile end, Google has established its operating system as the top one by number of handsets being manufactured but risks abound as the company is looking to acquire Motorola, one of Android the device manufacturers. This acquisition will most definitely have a chilling effect (and people at some of Motorola’s competitors have said as much behind closed doors), giving Apple a chance to expand its own market share into a domineering position or giving Microsoft a chance to relaunch its mobile offerings in a way that would first make it a viable third player and eventually could lead it to become one of the top 2 players (note that Apple’s position, as far as I see it, will not be threatened).

In video, Netflix and Amazon are increasing their collections, offering quality content at a low price and therefore putting some potential pressure on YouTube. As more general content become available, it could be that YouTube will have more difficulties growing.

Then, there is the matter of being treated as a monopoly. I suspect it’s only a matter of time before someone finds a reason to bend government regulators ears as to how Google abused its power in the search business. It won’t matter whether the allegations are true (as it didn’t matter when Microsoft was accused of abusing its monopoly position), once the claims are made and the lawsuits are launched, the perception of the company as a big bad wolf will be forever cemented.

Meanwhile, Google will continue making large amounts of money (probably billions) on its current offering but may find it hard to show the general public how it is relevant today. A question regarding its future success will however find its root in whether Google can continue to be relevant in the online advertising business (it is, after all, its core business) or find new revenue lines to replace declining advertising revenue. The answer to  THAT question will define Google’s future.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Google is the new Microsoft. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Open Graph

Before we look at the winners and losers, let’s recap where Facebook is going. A couple of years ago, the company unveiled the “Open Graph API”, which gave external sites the ability to add “like” buttons to their sites, and in the process allow end-users to things they like into their facebook stream, where they would be shared with their friends. This mean that a user could implicitly publish information to Facebook by just clicking a button. At that point, two things really happened:

• First, Facebook created a system that allowed it to better understand what people were reading because every time a like button is pulled down, Facebook can keep track of it and associate the information with the account of a Facebook user.
• Secondly, Facebook offered publishers a way to generate more traffic to their site by publishing content on Facebook that would return users back to their site.

This was a little creepy because it gave Facebook a tremendous amount of power but, in exchange, the company gave publishers access to more traffic so the agreement seemed balanced to everyone but the end users (which doesn’t matter, as we all know that “if you’re not paying for it, you’re not the customer; you’re the product being sold.”)

But it seems having access to that data is not enough for Facebook; now it wants more data so it can build better electronic profiles of its users. So this year, the company has decided that “Like” was not enough and they wanted to get users to give them access to anything they read on a particular site. So the company unveiled actions like “read, watch, listen” which allow developers to share all action data from a user after a one-time sign-up to the Open Graph API.

Mining the web… but not giving back

This time, the company is mining the web but the main beneficiary of those actions seems to be Facebook, which gets a better understanding of where users are when they are not on Facebook and what they are looking at. If we assume (and I am willing to take the bet that this will be the case) that most mainstream sites will start offering the new verbs, then Facebook will have one of the most complete understanding of a user’s demographic and psychographic profile. In other words, the data it will get access to is the holy grail of online marketing: users that can be tailored to based on extremely granular preferences.

That data can then be used to send ads that resonate with the user in the channels the user accesses most. Think this is crazy? Well, wait ’til next year’s F8, when Facebook unveils a tool to help external sites monetize their traffic better by targeting advertising based on users’ preferences. If this sounds suspiciously like AdSense from Google, it’s because it is part of the end-game. Facebook is no longer happy to have the largest site in the world, now it wants to have access to people when they are not on Facebook.

What’s fascinating here is that the data goes into Facebook but there is precious little information as to how to get it back out, making the word “open” a headscratcher as it is unclear how Facebook defines openness. To the Palo Alto company, it appears that openness is a one-way street: you open up your data to Facebook and in return Facebook “simplifies” the online experience by keeping your app on its platform. This is somewhat similar to the app store model offered by Apple and Google, where it’s OK to play as long as it is within their rules. Facebook is doing to the open web what Apple and Google have often been accused of doing, sticking another knife into its imminent demise.

Also of note is the fact that Facebook’s approach to getting all this data makes it impossible for anyone to create valid HTML5 pages as the Facebook code does not validate under this framework. So Facebook is also hampering the future of the web by making it nearly impossible to live by the ideal of the new web standards if you want to play in the facebook arena. This seems to shape up another fight between Facebook and the open web.

Another company has had similar ambition and it staked its approach first on offering superior search products and then on using the search data to target advertising on partner sites and eventually offer such capabilities to anyone who was willing to give them a percentage cut of ad revenue. That company, Google, has realized the limitations of its model and is busy trying to ensure it can get more data by building up offerings for ways in which people access the internet: so they’re pushing Android for mobile phones and Google Chrome as a better web browser because they want to be able to access data relating to where people are on the web, data that can then be used to create more customized ads.

Facebook at $150 billion?

This week, Google’s valuation sits around $150 and the highest Facebook has ever been rumored to be worth is $100 billion. I’d venture that people are selling the company short and that it is worth something on par with Google. It has masterfully played fears from online publishers and other sites and parlayed that in a potential position of power in the online marketing world.

The only thing that could make it more powerful than it is about to be is if it were to pair up its data with Google’s. A merger of the two of them would create an unparalleled database of internet users, containing just about anything about people’s intents (from Google’s search), their interests (from Facebook’s data), the amount of time they spend on certain properties over others (from either Facebook or Google’s data), and what they liked enough that they would share it with people their know (from Facebook’s data).

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The “Open” Graph. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The landscape so far

To date, many technology companies have tried to go after the TV screen as a market to conquer and most have failed. For example, Microsoft has, for a long time, tried to create a Media Center edition of their popular Windows operating system but outside of a few computer geeks, that concept never really took off. On the hardware end, companies like Boxee, Roku, WD (with the WDTV), Apple (with the Apple TV) and Google (with Google TV), have tried to offer a system that would connect users to a variety of internet content. Roku and Apple have had some early successes in the market, largely due to their pricing strategy.

On the provisioning end, companies like Netflix, Hulu and Amazon have started working as aggregators of streaming content that is delivered straight to your TV, without the need of a computer. Their strategy has been to work with consumer electronic companies to embed their players into DVD players and televisions. Along the way they have solidified their position in this market, going beyond early adopters and far into the mainstream.

And yet, something may have been missing from the equation to make internet TV a business that is as viable as computer or mobile software.

But things could change very rapidly.

A second wave for the third screen

In today’s busy media attention environment, there are three fundamental screens: your computer, your mobile, your television. The technology sector has successfully navigated itself in a position of control over the first two but a grasp of the third one has remained elusive. Consumers were mostly not interested in adding new devices to their entertainment centers, leaving even Steve Jobs to consider his own company’s attempts in the space as nothing more than a hobby.

But if recent rumors are true, the war is about to heat up again. A couple of weeks ago, Google announced it would acquire Motorola mobility. At the time, most people viewed it as purely a patent play. However, buried inside Motorola is a little extra reward: the second largest player in the TV set-top box provider in the United States (the other is Cisco). So if a cable TV box has the name Jerrolds, General Instruments, or Motorola on the front, it will soon be a Google box. And right now, those brands represents almost a third of all cable boxes in the world, giving Google a very strong foothold in the living room. The challenge for the search and mobile giant will now be to find a way to upgrade all those boxes to support the Android Operating System.

Meanwhile, there have been rumors that Apple is going to start building its own television, embedded with the iOS and all it supports. The rumors seem to be corroborated by a few facts.

In a January investor call, then-COO and now CEO Tim Cook mentioned that the company had secured access to supplies that were “focused in an area that we feel is very strategic.” In February, Apple paid close to $4 billion to secure supply of LCD screens for the next two years: at the time, the general consensus was that it was to cover iPhone and iPad screens but why make that assumption? It seems that some of those LCD agreements could be linked to the development of a TV set line, long rumored by Apple watchers and I would venture than when it comes out, it will be called the iTV (for Internet TV), explaining why Apple’s current set-top box product does not carry that moniker.

The revenue opportunity

Interestingly enough, when you look at Apple vs. Google, and some of their moves towards the living room, you seen pieces of their DNA show up. In Apple’s case, it’s all about optimized supply chain management combined with a piece of hardware that they will probably sell at a premium compared to the rest of the market. For Google, it’s about a subsidized hardware that is given for free or almost free to its users but generating through another channel (probably advertising).

At the same time, in both cases, the attempts will be towards trying to integrate their other offerings (for Apple, the iOS ecosystem and for Google, the search engine and Android) with the TV screen. In order to do so, they will not only have to work on ensuring a smooth transition from one screen to the other but alos provide development platforms and tools for others to build on their offerings (Today, for example, Roku, which initially was focused on streaming media, is offering a box that can now support casual games). I suspect as soon as the AppleScreen and GoogleTV start getting more mindshares, we will see more videogame offerings pop up on those devices, eventually upsetting Microsoft (with its Xbox), Nintendo (Wii), and Sony (PS3).

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The third screen. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

An inexpensive patent bet

In his note announcing the acquisition, Larry Page made it clear that a lot of the acquisition was due to Motorola’s strong patent portfolio. At the current time, the company holds 17,000 patents and has filing for another 7,500.

Earlier this year, Carl Icahn, Motorola’s largest shareholder, estimated that the patent portfolio alone could be worth $4 billion. In June, Apple, Microsoft, and RIM banded together to acquire 6,000 patents from Nortel and keep them out of Google’s hands: the pricetag on that acquisition was $4.5 billion. This means that the consortium had paid about $750,000 per Nortel patents. If you were to apply the same number to Google’s acquisition of the Motorola patent portfolio, the price tag would be $12.75 billion. It is interesting to see how this number is extremely close to what Google ultimately offered for Motorola.

But it gets better…

Motorola Mobility, the unit Google is acquiring, has $3 billion in cash on hands, reducing the price of the overall deal to $9.5 billion and dropping the per patent price to just under $560,000 per patent, assuming none of the filed patents are accepted or under $390,000 per patent if you assume that Motorola will get all 7500 filed patents approved.

… and realize this is all based on a $0 valuation of the rest of Motorola’s assets.

So what’s in there? In order to get a better understanding, one just has to look at some of the patent-related lawsuits Motorola has filed in the mobile space. For example, last October, they assessed that Apple had violated 18 specific patents in areas like WCDMA, GPRS, 802.11, wireless email, location based services, device synchronization, etc…  The next month, they sued Microsoft around things like an online marketplace, map services, video coding, etc…

So the company has a set of patents that are covering large areas of what we now know as the smartphone space but that’s not all.

The handset business

A lot of people are going to focus on the fact that Motorola has a healthy mobile handset and accessories business. This business has been valued at about $3 billion and generated $3.3 billion in revenue in the last quarter. That business covers handsets, as well as accessories.

If Google were true to its word that it wants to continue working closely with its partners in the Android ecosystem, it might have to reconsider the handset unit as part of the asset mix it’s offering. A way to handle some of this could be through divestiture, by selling off some of the parts or exchanging them for patents, if that’s what Google is after.

For example, the company could hand off the accessories business (bluetooth headsets, etc…) to HTC, which has traditionally been a strong player in the manufacturing of such devices, in exchange for a guarantee that the company would continue developing on Android and/or some of the patents the company may have acquired in its recent deal with S3. The company should also look to sell Motorola’s manufacturing divisions to HTC, which could merge them into their more traditional contract manufacturing offerings.

The company could also sell the handset unit to Samsung in exchange for a similar deal.

Google would then be able to consolidate the patents and protect all companies in the Android ecosystem and avoid any potential channel conflict in the process.

The TV business

Another noteworthy part of this acquisition is the TV set-top business, which has been valued at $2.5 billion in the past but is also seen as having a value of near $0 in this acquisition deal.

Through acquisitions, Motorola has become the leader in providing boxes that connect cable and satellite broadcasts to television. In the US, for example, they are part of the duopoly with Cisco in the TV set-top box business.

This creates ample opportunities for Google and its floundering Google TV offering. Through this acquisition, the company now has a chance to control a large part of the future access to the living room. It won’t happen quickly but I would not be surprised if GoogleTV started showing up as part of cable package offerings over the next few years.

Along this path, Google acquires a large amount of relationships with cable TV providers which may help it in ts quest to deliver YouTube content to more people.

Winners and Losers

A deal of this size is so disruptive that it engenders its own set of winners and losers.

I would say that, at first glance, the big winner on this is obviously Google and the big loser is Apple. With this deal, Google has gone on a full assault on the Cupertino-based giant (which, just last week, became the most valuable company in the world.)

First, the cold war between Google and Apple has now gone hot: Motorola and Apple were involved in several lawsuits prior to this acquisition and I assume that Google will not back down from those.

Secondly, Google is not only going after the mobile business but gets to be disruptive to the movie and TV business (due to the set-top unit) and could potentially thwart Apple’s burgeoning AppleTV business while at the same time undercutting iTunes in the video space.

It is unclear as to whether Microsoft and Nokia are either winners or losers in this deal.

Microsoft could end up a winner if Samsung and HTC decide to spend less time on Android and use Windows Phone as a hedge. Or it could be a loser if it turns out that integrating hardware and software is the key to success in this market (the company acquired Danger a few years ago and was unsuccessful with its own handsets).

Nokia could be acquisition targets for Microsoft, which could make them winners moving forward. Or Google could offer free phones, killing both Microsoft’s chances at selling an independent OS and Nokia’s chances at selling many Microsoft-OS based phones.

RIM and HP (due to the Palm unit) strike me as the biggest losers in this market. Neither of them has a strong footing in the marketplace and today’s announcement seems to further strengthen the Android position, giving them less room to maneuver. Furthermore, the rich patent portfolio Google is acquiring may mean that the two companies will have to pay more royalties to a business that has been killing them. Either way, the future is, at best, uncertain (if they were to license their OS out, they may have a chance).

Conclusion

Today’s announcement substantially reshapes multiple competitive fields. The effects will be felt in both the mobile and living room spaces for months and years to come. It’s a bold play by Google but also one that is pretty conservative because the benefits accrued as a result of this acquisition are substantially larger than the price tag (let’s not forget that, considering Motorola’s cash reserves and revenue projections, Google is bidding less than 1x Motorola’s yearly revenue on this).  This deal seems like a real game changer with little or no downside for Google.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Google Acquiring Motorola. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Google vs. Twitter

With 750 million users, most of Facebook’s time is supposedly spent on pictures and games. In its initial iteration, Google+ does not seem to support those core components of the platform, which may make one wonder if Facebook really is the target. What it does support today, however, is a better version of Twitter, complete with specific status updates. So, in its current iteration, I would venture that the target for Google+ is Twitter.

Which may lead one to wonder why Google is so aggressively going after Twitter. I believe it is doing so because Twitter search may be starting to steal traffic, and potentially revenue from Google search. In a somewhat unsurprising move, Google decided to not renew its revenue agreement to get access to the Twitter stream. I would venture that this is an attempt to kneecap Twitter and ensure it doesn’t become a serious threat when it comes to advertising revenue.

While the company is generally considered as one that tries to do no evil, Google is also keenly aware that its success relies largely on two near monopolies: search and online advertising. With Twitter emerging as the first serious competitor in the space in a long time, rumored to be racking in $60–70 million a year in advertising revenue that could easily be targeted based on tweets, Google is seeing red and acting accordingly against the threat.

Google vs. Facebook

Meanwhile, there is the fight against Facebook. Facebook presents a different problem for Google in that it has taken an increasing share of online users time and put it in their walled garden, away from the web that Google mines for revenue. This trend is largely built on the back of games and photos so Google+ will try to tackle those things next.

While it is clear that, within the code, are hooks that will allow for games to be hosted on the platform, it is unclear whether that strategy can succeed. The main challenge they will encounter is that, as the owners of slide, Google is not just a provider of platform for online gaming but also a major player in the space. As such, some of the smaller players may be worried that the platform could sway in ways that me be less than beneficial to them. Zynga, because it needs to get rid of its current dependency on Facebook will probably hedge by putting some of their games on the platform but it is unclear as to whether other companies might join in.

On the picture end of things, Google is leveraging its Picasa offering, however, it is clear that it could do more by integrating it better in the + platform.  The mobile integration is a nice piece and may actually do collateral damage to a number of mobile photo hosting applications link instagram, for example.

But the picture offering is not enough. A proper merging of YouTube in the offering might give it some extra power by leveraging their strong presence in the video space to offer something that doesn’t yet seem to exist on Facebook.

Google vs. Apple

Apple integrated the new version of iOS with Twitter, basically matching one feature that has existed on many Android phone for a few years. They have yet to integrate with Facebook but I would not be totally surprised if they were to do so in future versions of their device. Android already supports both Facebook and Twitter integration and is supporting Google+ through an added application.

In order for this integration to work, Google will have to integrate Google+ at a much deeper level than it does today. However, with a social network and a mobile offering, Google is in the interesting position of being able to become the social network for mobile devices. On the other hand, the approach they have taken to date leaves much to be desired. By installing two different apps on the device, the experience feels tacked on rather than integrated. The Android team has to do some serious work to really rethink things over and tightly integrate Google+ into the OS, making the experience seamless.

The acquisition game

With a rumored 4–5 million new users in the past couple of weeks, Google is off to a good start with Google+ but still only reaching one percent of the Facebook world. Building on the back of Gmail may be a solid strategic move at this time, as Gmail can get Google to roughly 200 million users. What what about the more than tripling of that number required to get to parity with Facebook? For that, Google is going to have to do a lot of hard work and it’s unclear how they will go about acquiring more accounts going forward.

It may just be that Google will try to require every user of every service they provide to create a Google profile account moving forward. Today, Android users are required to create a gmail (or google apps) account to sync up their device. This represents one acquisition channel that none of the other players in the social media space have and could be one big area for growth.

Another area for potential growth is in the enterprise space: looking at the Google hangout feature, it seems to me that circles could become a useful way to organize a company and get quick online meetings. In fact, it may be more useful as a working tool than as a merely social one.

Still, at this time, it is hard to see a case where Google could topple Facebook. But the history of social networks is riddled with the bodies of players that were once at the top and eventually superseded by new entrants (think Friendster and MySpace) so it is not totally impossible that Facebook could find itself in hot competitive waters.

What about reputation rating systems?

Last but not least is the question around reputation rating systems like Klout or Peerindex. Those companies have built their model on the back of Twitter and Facebook and must urgently adapt to include Google+. With many early adopters spending more time on Gooogle’s property, the reputation rating game has a new entry point that will need to be urgently included in their calculations if they want to continue being relevant. When I first mentioned this, many people replied that those services are just not good enough as is and it seems that they have yet another challenge to deal with if they want to establish themselves as relevant in the future.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Some thoughts on Google+. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Looking at the basics

As frequent readers of TNL.net know, I have to a tendency to try to run some numbers before passing judgement. Oftentimes, I discover that my hunch are correct but, almost as often, I find some interesting and surprising nugget of information in the data. Ultimately, though, it’s a question of gathering the information, something that too few people seem willing to spend time on.

So for this IPO, I decided to investigate how some fundamentals may be working either for or against the success of the LinkedIn IPO. My instinct was telling me that the fundamentals may be different now but I needed the data to assert which way things went. A lot of searching through both the web (and, as I mentioned last week, getting historical data can be hard on the web) and through paper record (books and magazines I still keep in my library), I was able to come up with the following chart:

One of the things that become apparent at first glance is that we are talking about totally different scales of business. Netscape was a company operating at a loss ($8 million) with very small revenue (not even a million dollars) when it went public. By comparison, LinkedIn seems to be a relatively healthy business with profits of $15 million on almost a quarter billion in revenue. On the other hand, that business paled in comparison to Google, which was generating profits of a quarter billion dollars on revenues of $1.4 billion in the run-up to its IPO.

Adding to the challenge in comparing them was the fact that they were all looking to raise different amounts so I decided to play “what if” with the different stocks.

What if LinkedIn had launched as Netscape?

I decided to normalize the data based on a revenue, assuming that LinkedIn would try to get a market capitalization equivalent to that of Netscape based on revenue:

So, already here, we see some fundamental differences. Netscape would not even be allowed to go public today based on the paltry revenue they were generating at the time of their IPO and LinkedIn would turn into the largest corporation in the world if the same logic had been applied to its revenue stream.

What if LinkedIn had launched as Google?

But the irrational exuberance around the Netscape IPO should not serve as a way to give LinkedIn a clean pass. In order to do so, I decided to compare the company to Google at the time of its IPO. People who were around then will remember that the Google IPO happened at a time when internet stocks were mostly out of favor but Google was garnering a very strong following. In a lot of ways, Google had the media presence of a Netscape in its time but with real revenue and earnings.

As price to earning ratio are a valuable way to evaluate companies, I decided to base my comparisons between LinkedIn and Google on it. So here goes:

The difference largely comes down to the number of shares outstanding but ultimately, it looks like LinkedIn P/E ratio are not that wild and while IPO Opening day are too small a data set to really make wild generalization, it seems that the LinkedIn IPO was one that basked largely in relatively rational behavior.

Conclusion

If the LinkedIn IPO is an example of what this boom cycle is going to look like, we may be in luck as the markets seem to be acting a much more rational, profit-focused manner than they have in the past. My read is that there may even be some level of conservatism to the way markets are approaching internet stocks and a healthy skepticism that will benefit real companies by weeding out the ones which wouldn’t make the cut under normal conditions.

Update: Some of my calculations were wrong and, thanks to many commenters, I finally have the P/E numbers corrected. Based on the new number, the conclusion can be vastly different as the P/E ratio for LinkedIn today seems to be much higher than it was for a company like Google. Can LinkedIn be 5 times as successful as Google has been since its IPO? I don’t know. Is there some inflation due to a more optimistic market outlook? Absolutely.

At the end of the day, it looks like LinkedIn is overpriced, when compared to Google, and underpriced, when compared to Netscape. What that means in terms of investment strategy is something I’ll leave to people smarter than me to figure out.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Is LinkedIn the new Netscape or the new Google?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Twitter tweets expiration

The foundation story of Twitter claims that the first tweet was made by Jack Dorsey and was “Just setting up my twttr”. But what was his second tweet? Or his third one? What was his first @ message? Today, it’s impossible to answer any of those questions because neither the Twitter search engine nor scrolling through the complete list of tweets from someone will provide you with all the results.

The Twitter search engine apparently expires content after a few days. Tweets become inaccessible after 3200 tweets or roughly three and a half days if you are tweeting at the top rate allowed on the service (users of Twitter are allowed a maximum of 1,000 tweets, which may explain why there have been so few uses of Twitter as a fully interactive type of service).

With Twitter now claiming an important role in events like the 2009 Iranian uprising or the 2011 events in the rest of the middle east, it seems that expiring tweets is a bad idea as it deletes an important historical record. At the current time, Facebook claims that developers can access “all of a user’s status” which might imply that their retention policy is stronger that Twitter’s.

Fun with Google searches

But social media may be the exception and not the rule so I decided to start looking at web pages, which have been around for almost two decades now. Searching the internet of the past is an interesting thing. For example, let’s look at the tech industry:

The Netscape IPO seen as the first big internet IPO, happened on August 10, 1995. Doing a search the week before and after returns 7 results.

Microsoft’s introduction of Internet Explorer was in August 1995, with a second big announcement in December of that year. A search for “Microsoft introduces internet explorer” in 1995 returns 40 results.

Some may claim that I am being unfair, picking events that happened before Google’s creation. So I decided to look at events after 1999, at a time that would be contemporary with Google’s existence.

For example, the presidential election of 2000 was one of the hottest political contest in American history. It pitted Al Gore (421 Google results between January 1, 2000 and January 1, 2001) against George Bush (418 results for the same time period) and left the country wondering who was the winner for several days. There wasn’t a 24 hour news channel or newspaper in the country that did not cover the events extensively. And yet, we are left with less than a thousand pages from the period.

Some of those pages in the Google index may not even be from that time period. For example, the last page in my search for “George Bush” in the time range of January 1, 2000 to January 1, 2001 returned a site called celebritytweet.com. Considering that twitter wouldn’t exist for a few more years, I have doubt that the site existed in 2000.

If politics may be too narrow a topic, maybe something like the attacks on the World Trade Center might have more impact. So doing a search for pages relating to the week it happened (I did a search with a date range between September 10, 2001 and September 18, 2001) would probably returns TONS of pages. The result, according to Google is 461 pages.

Let me repeat that figure: 461 pages of historical record for what is widely agreed as one of the most important historical event in our lifetime.

For a quick comparison, I decided to take a somewhat less important event from the past week. Sure, I could have gone for the raid on Bin Laden but instead I decided to go for something a little more inconsequential: Lady Gaga’s deal with Zynga. A search limited to the last week has returned 477 results.

So if Google is the arbitrer of what’s important and the repository of most of our collective memory, a visitor from another planet looking at it could easily conclude that Lady Gaga cutting a deal with Zynga was more important that the attacks of 9/11. I’m not one to pass judgment on the cultural importance of Lady Gaga but something tells me that either the Google algorithm is wrong here or the Internet tends to be a very forgetful place.

Conclusion

As more an more media becomes digital, the concept of media retention is becoming increasingly important. It should become a growing area of concern for most historian and archivists to see that large portion of the late 20th century and the beginning of the 21st century may be leaving behind a smaller footprint of data than previous era. Efforts like the Google Book Search project are making great strike making things like physical books more accessible by creating digital reproductions of that content but they should also start considering making more recent, already digitized data archived in some fashion. Otherwise, the lack of a past may make us more susceptible to creating a less perfect future.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Forever is a long time. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Many Questions

The mobile market is basically broken out in a 2 + 2 configuration: Android and iOS are the two contenders you can’t do without, while RIM and Microsoft are the two you might want to keep an eye on. Looking at this through the lens of limited resources, it makes for tough choices. If you only have resources for one platform, which should it be? If you have resources for more than 2, should you also try to reach a third platform (and if yes, which one) or should you pour more investments in the first two?

In order to better make those calls, one must assess the market position of each of the players and place some bets as to where those players will be in 12 months. While interesting from an intellectual challenge, it can be emotionally wrenching from a company standpoint as some of the bets you make today could help turn your company into a winner or loser.

App or web?

Mobile apps seem to be the largest trend here. While many new apps have come up over the last few years, there doesn’t seem to be much discussion of mobile web offerings. Curiously, the internet seems to be splintering into javascript-heavy apps running on users’ computers and mobile applications of the same apps running natively on mobile devices.

With HTML5, a lot of the benefits that mobile apps could offer seem to disappear: whether it is access to geo-location capabilities, local caching so the app can run when there is no signal, or even access to hardware capabilities like a camera (something Google is trying to bake into future versions of HTML), there appears to be an increasing array of possibilities that would ensure some parity between web-based offerings and apps-based ones.

However, the web has a few challenges to overcome. For starters, local notification, or the ability to throw some type of alert flag when the application is not running, is not available in web apps. One-click billing is not built-in by default. Access to local hardware devices is also limited. But ultimately, the problem web apps are going to encounter when compare to local apps have nothing to do with technology.

The main value of an iOS or Android app over a web app is largely a marketing issue. To a lot of thought leaders, the web is seen as yesterday’s invention and apps are seen as the current hot trend. To launch a web app in 2011 is seen as similar to trying to launch a CD-based offering in 1995: maybe interesting but probably not, and more likely outdated than up to the latest trend (or to put it in more brutal terms, it would be seen as “dead,” as per the criteria highlighted in Om Malik’s excellent post on the subject.)

Furthermore, the presence of an app in the respective app stores by Apple, Google (and now Amazon) represents marketing channels which cannot be matched in the open web. As restrictive as they are, those channels can represent a substantial advantage for new product offerings. The presence of your apps’ icon on a user’s phone is also another marketing marker that is hard to be matched by web application: yes, it true that bookmarks can be presented alongside applications but few users know how to do that and even fewer actually do make those links.

If an app is launched on a platform like iOS and Android, it gets more publicity than if it launches as a mobile web-based offering. This, by the way, is something I see as a reason for concerns in the long terms as it means that most of the debate is now centering not on a more open world but on one as to which walled garden is better: Apple’s or Google’s?

As a strong supporter for a more open web, I find myself conflicted: on the one hand, I see that getting into those walled gardens is bad for the web as a whole; on the other hand, in order to run a successful business, I have to be in those walled gardens. Almost a year ago, I covered this as Apple is the new China and things have gotten worse since, as Google is following a path similar to Apple. But in the end, one has to be realistic: the only way to influence this debate is to become successful enough that your voice gets amplified: so playing in the walled gardens is imperative for any new mobile company that wants to succeed.

iOS or Android first?

With apps as an obvious first step towards development, the next question in the decision tree is Android vs. iOS. Here, there are confusing signals in the marketplace: on the one hand, one can talk about market size and see that Android is becoming the most used operating system in the mobile world. On the other hand, one can see the fragmentation of the Android market as a developer’s nightmare.

Assuming the fact that most startups have limited resources, one could safely make the bet that a less fragmented market is easier to launch a successful product on and thus developing for iOS first would make the most sense. That is generally the rule that most developers follow and I want to challenge that rule.

According to Apple, there are over 350,000 apps in the app store. By comparison, the Android market has over 100,000 apps. So one can safely say that there are roughly 3 to 4 apps on iOS devices for every app on Android devices. Today, the path of most applications is to establish themselves on the iPhone, get the adulation of the Apple crowd and then move to migrate to Android devices.

This generally means that apps which were successful on the iPhone benefit from a lift when they finally make it to the Android marketplace as Android users are curious to see what all the hubbub was about. This situation has led to a situation whereas both top 10 lists are dominated by apps that first saw the light of day as iOS ones.

But what if one were to apply the amount of effort that goes into crafting a well-received app for iOS into developing a similar app for Android first? What if a company were to decide to prioritize its efforts on developing the best app for Android devices? All things being equal, a great app developed for iOS would have to be better than over 350,000 apps while a similar app being developed for Android would have to be better than 100,000 apps.

When looking at those numbers, combined with the fact that the Android marketplace is exploding, it seems that Android development makes more sense when first getting out the door but there is yet another catch.

Free or Paid?

Paid apps seem to fair better in the Apple world than in the Android world. I don’t know if it is due to the demographic profile of Apple users vs Android users (remember that Apple tends to market itself as a premium brand, probably creating a user community that is more affluent and more free-wheeling with its spending) but the fact of the matter is that if you are marketing a paid app, this is something you have to consider.

So if your monetization model is purely centered o selling apps, you may be better off using Apple’s offering (as long as you can figure out how to build a successful business 99 cents a time.)

On the other hand, few apps with hybrid strategies (social, web, mobile) are offered as paid ones. A few examples like Facebook, Twitter or LinkedIn all seem to show that app that also work as web-based platforms are generally free (as platforms though, they have created opportunities for others to market paid apps on top of their services). If your app is a social web app, the Android market seems to be a better place in the short run.

The key to this positioning will have to be around your company’s ability to present itself as breaking the mold. By going against the grain, you are likely to suffer the ire of Apple fan-boys but the ensuing controversy may get you marketing views you would not have gotten otherwise.

Danger to Android

Today, Android is indeed a fragmented market. So development for that platform is more complicated than development for iOS, where one only has to worry about 2 phones (iPhone 3GS and 4).

The challenge Google now has is balancing its openness while making it easier for developers to deal with the multitude of changes. Its recent efforts in trying to tighten up regulation of the platform can cut both ways. Developers on the Android platform should keep an eye on the impact of those efforts on carriers and device manufacturers support. If Google tightens the screws too much, it could lose some of the momentum it has built and give companies like Apple and Microsoft a chance to establish leadership in the space.

The second tier

Today, developers have to develop an offering for both the Android and iOS marketplace. Once they’ve done so, the next strategic question is whether to put any effort into RIM, HP (aka. Palm) or Microsoft’s offering.

If I were to follow the points above, logic might dictate that the smaller the platform, the better the way to shine out. However, at the current time, those platform look too small to cater to today. The recent announcement from Nokia may point to Microsoft becoming an emerging platform again but  the actual switch is not due for another couple of years. At that point, the marketplace may look radically different again.

So at the end of day, my recommendation (and what we’re betting on at Keepskor) is Android first, mobile web second, iOS third, and then figure out the next step.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title iOS, Android, and the mobile web. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The post-PC world

Since the early 1980s, the personal computer has been sitting at the core of people’s experience with technology. But several trends have chipped away at that dominance for the last few years, first with the rise of dedicated devices with computer-like attributes (eg. ereaders and MP3 players), then with reintegrated devices that brought several of those features back together in a more portable form factor (smartphones and tablets).

Along that curve, Microsoft and Intel found themselves in an increasingly difficult position, largely trying to hold on to the legacy platforms that sourced the largest portion of their revenues while unsuccessfully trying to find ways to play in the new world.

Along the way, the two companies grew farther apart. In late 2004, I had called for Apple to move to Intel chips, a call that was met with derision by most people at the time because they thought Intel would never do anything that could run counter to Microsoft’s worldview. A couple of years later, Apple and Intel did make the move, creating what was possibly the first wedge in the Wintel cartel.

Last month, Microsoft made an announcement that was probably similar in terms of overall strength, looking to ARM processors as the future, and moving to a space where their reliance on Intel processor was relegated to the back of the bus. It wasn’t entirely clear at the time but one could see that the Wintel alliance had been hobbled and could possibly die off soon (in related news, HP announced this week that it would consider running its webtop OS on PCs).

Meanwhile, it was only a year ago that Intel and Nokia announced a strategic partnership, where they would merge their OS platforms. The intent there, I suspect was for Intel to start pushing its own chips into Nokia devices, allowing them a play they had longed for in the mobile space.

Yesterday’s announcement from Nokia that it would abandon its own OS effort and focus on Windows Phone 7 probably infuriated some people at Nokia.

Why Winkia will work: Developers

Of course, there is a lot of doubts about the partnership. High level partnership have a tendency to fail (in fact, Horace Dediu has shown Microsoft’s particularly bad track record in the mobile space).

But I disagree. Earlier this year, I argued that Microsoft would acquire Nokia for its distribution footprint. At the time, I did not elaborate but here’s how I see things working.

For starters, let’s look at areas of strength and weaknesses. Microsoft still has a large development community used to developing with its toolset and aching to get into the mobile space. With Windows Phone 7, that crowd now can use the same skills, programming languages and development kits they have been used to for years to create for years.

But the challenge that was presented to date was that there were no users of Windows Phone 7. While the operating system has generally been well received by critics, there has been precious few apps developed on top of it to date. Part of the reason for this, I suspect, is that there isn’t really a built-in public for those apps yet so many developers are waiting on the sidelines. In fact, this is something that people at Microsoft were painfully aware of, as they are now starting to explain to developers that the deal will bring a larger public for their apps. In a recent blog entry, Matt Bencke, Microsoft’s General Manager for Developer and Marketplace in the mobile space, said:

In simplest terms, this alliance can dramatically increase the customer base for Windows Phones, and, by extension, your apps and games. […] For example, Nokia already has strong relationships with operators in more than 190 markets. Nokia also manages an application marketplace that delivers 4 million downloads per day; a channel that will complement the existing Windows Phone Marketplace experience to bring Windows Phone developers and Nokia customers together.

[…]

From a tools and platform perspective, we’re working to make it as easy as possible for developers to take advantage of this new opportunity.

So the message they send here is clear: more people to use your apps and you can use the same tools you know already. This is bound to help create a market where lots of new apps will end up being created in a Windows Phone 7 environment only.

Why Winkia will work: Footprint

So how big is the marketplace we’re talking about? Well, before we enter this arena, let’s make a few key assumptions: growth in the mobile space is largely coming from the smartphone category. In fact, the entry of sub-$100 android phones is basically going to kill the concept of smartphone altogether by just gobbling up the regular phones and pushing the trend to every phone becoming a smartphone. So the game here is for the whole pie instead of a smaller portion.

So how does Nokia do in that space? The Symbian operating system, the one the company is abandoning, was on 37.6 percent of smartphone devices in the last quarter but Nokia overall marketshare in the mobile space was 28.9 percent.

How does it compare to others?  In the OS game, Nokia has a 15.1 percent lead over Android, its next nearer competitor (Apple comes in 4th, behind RIM) and an 11.3 percent lead over Samsung in the overall mobile space.

Meanwhile, Microsoft was nowhere to really be seen, with a mere 4.2 percent of the OS market, coming in above “others” in the OS category.

If the tie-up had happened last quarter, the combined team would hold first place with above 40 percent of the smartphone market, almost double their nearest competitor (Android) and almost triple Apple’s own offerings.

With that large a footprint, any developer will have to think about supporting those devices.

Furthermore, Nokia has a long-established relationship with phone carriers around the world (while I have not checked the data, I would be ready to venture that there isn’t really a phone carrier out there not carrying some Nokia phones). That kind of network will be hard to defeat moving forward.

Why Winkia will work: Patents

When he unveiled the first iPhone, Steve Jobs made it clear that there was going to be a huge legal fight in the mobile space.  During the unveiling, he highlighted that oncoming fight in the following way (emphasis is mine):

We have invented a new technology called multi-touch. It works like magic, you don’t need a stylus, far more accurate than any interface ever shipped, it ignores touches, mutli-finger gestures, and BOY have we patented it!

[…]

We filed for over 200 patents for all the inventions in iPhone and we intend to protect them

Apple later sued HTC and Motorola over some of those patents.

Meanwhile, Microsoft has not been shy in suing some companies over patent infringement relating to Google Android. The operating system from Google continues to be challenged in court, the most recent lawsuit coming from Oracle over alleged infringement of Java related patents.

So all and all, the mobile game is one dominated by patent fights. In the lead-up to this week’s announcement, Nokia’s CEO was touting its patent portfolio as something to look at. A story on AllThingsD put it as such (emphasis is mine):

Friday’s investor meeting will also address other aspects of the company, including its services strategy, its plans for its Navteq navigation unit and its plans to leverage its huge patent portfolio.

Between Microsoft’s patents in the mobile space and Nokia’s, I suspect we are soon going to see some lawsuits emerging from the new partnership and going after different aspects of the iPhone and Android devices (though I suspect Google will be the first target, with the iPhone being left for later).

Conclusion

Between Microsoft’s strength in the development community, Nokia’s strength in the hardware and distribution realm, I would venture that we may be seeing the beginning of a major shift in the mobile landscape. Both of the partners are quite strong and I would not be completely surprised if they were to both be able to reverse their fortunes in the mobile space. I also would not be totally surprised if, at some point down the line, Microsoft were to announce that it is taking over Nokia and folding it in. An interesting thing is that the cut in the overall market capitalization of Nokia after the announcement has now left it in a position where Microsoft could buy it in cash if it felt like it.

However, there are still a few things to be ironed out. For starters, Microsoft has just tied its OS to one partner and may have difficulties convincing other players to build mobile phones. Expect Samsung, LG, and HTC to stop investing in Windows Phone 7. So if Nokia fails in regaining some momentum as a result of this partnership, it may take with it Microsoft’s hopes in the mobile space.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Winkia rising. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Five years ago, people worried that the acquisition of YouTube by Google for a staggering 1.65 billion dollars was the first sign of a bubble inflating. At the time, I looked at the M&A activities and showed that the YouTube deal appeared to be an outlier.

This year, worries are popping up again, this time due to the kind of valuations many of the leaders in the space are getting. As my friends Jon Battelle and Fred Wilson point out, there is a substantial gap between what happened during the dotcom era and what is happening today.

As someone who believed the same thing, I decided to do a little research to get a sense of what valuation, revenue lines, and user base looked like. I did research on Google to get the valuation, revenue, and number of users of the most talked about companies. And it looked like this:

The first thing that becomes apparent here is that, outside of Twitter and Foursquare, we’re dealing with companies with strong revenue flows. But does that justify their valuation? Let’s take the data and look at what else we can learn from it:

All and all, the valuation themselves actually look quite low when you look at them through the lens of revenue (once again, I’m making exception here for Twitter and Foursquare, which are both still working on developing their revenue models — and I hear that the current valuation of Twitter in this round is dependent on their publishing a revenue model).

The other thing to look at is potential. GroupOn has outstanding revenue per user (more than twice the amount that Google gets for its users) so it seems that its ability to get more users would allow it to become as big, if not bigger than Google if it can maintain this average. Facebook, on the other hand, has a lot of growth opportunity in its average revenue per user. As one of the largest internet companies in the world, even something as simple as a couple of extra dollars in average revenue per user could generate billions in extra revenue.

But how do those compare to existing publicly traded internet companies. Thankfully, some of that data is available (Apple data is here):

So is there a bubble? I would say that if those companies are representative of the rest of the industry, there isn’t.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Doesn’t feel like a bubble. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

User centric

One of the big news items in the technology world was the 5 minute tirade Steve Jobs recently unleashed against Google and its Android mobile operating system. The relevant part that is key to the whole discussion, in my view is the following;

We think the open vs. closed is just a smokescreen to try and hide the real issue, which is: What’s best for the customer? Fragmented vs. integrated. We think Android is very very fragmented and becoming more fragmented by the day.

To Jobs, the customer is key. So, in his view, and in the view of most people who support the approach Apple is taking, complete integration is the key to success.

This is a view that excuses any decision by the product makers as long as it keeps the customer happy. A few months ago, I alluded to Apple providing a Disney-fied version of the computing world:

… Steve Jobs, largest Disney share holder. The net result is that the Apple leader has now learned to turn his company into the new Disney, bringing safe products to the masses in a highly sterilized environment that may not appeal to all.

And a Disneyworld version of computing is OK for most people. Most people love the magic kingdom but, for a portion of the population, Disney world is a place you visit, not one you live in.

To Apple and its supporters, the end user of a product is the central point and the product creator (in this case, Apple and Steve Jobs) has all rights over the direction of the product as long as it benefits the customer. This leads to a million little decision that add or remove components and features of a product to create an all-encompassing offering.

Some of the decisions lead to truly amazing leaps forward while others get more controversial. And there is a high level of intelligence to most of the decisions that go into making Apple products but while Apple devices are intelligently designed, nature isn’t.

And that’s where differences start being highlighted.

Developer centric

The developer world takes a view that is almost biological when it comes to how software should evolve. From the very mention of ecosystems, to the way software ought to evolve, people who believe in the long term health of the industry as a whole argue that diversity always wins over integration.

In the developer-centric view, openness is an essential component because when everything can be seen, when transparency rules the land, then mistakes get corrected more quickly and the best code wins. The developers point to how evolution works in nature and to the works of Darwin on natural selection to highlight how the best code naturally gets selected from the wide diversity of offerings.

Open access to research seems to show that ideas that are not locked down end up being more successful. Open government data allows for more work to be done voluntarily and in a less expensive fashion that closed data. Open source points to systems becoming more secure and more stable. Open, in other words, seems to be the cure to all ailments.

In my view, open is great when a new system is introduced because it allows for anyone to look at any innovation, dissect it, and understand it. In other words, it levels the playing field by allowing any newcomer access to the same information as anyone else. There is a democratic element that is appealing when hearing about open.

An important proponent of the open view is Tim Berners-Lee, the inventor of the web (and thus, probably one of the most important figure alive in the computer world today). When he first came up with the web browser, he made a key decision that would accelerate the growth of the web: he created a menu item that allowed anyone to view the “source” code, or the actual innards of a web page, to be viewed by any user who desired to do so. It allowed for a generation of web developers to learn the tricks of anyone that built a page before them offered and fostered an explosion of creativity that has led us to the current web.

So which way?

But the open web also allowed for some pretty dreadful looking pages. However, with billions of pages now available, the argument is that the bad ones sink to the bottom while the best ones raise to the top. This would seem to justify the value of open over closed, the value of diversity of a more edited approach.

There is, however, a way to resolve both views and it is through a quote that has often been attributed to Charles Darwin, the father of evolution:

It is not the strongest of the species, nor the smartest of the species, but the most adaptable to change that survive.

Whether the quote itself is from Darwin or not, it represents a position that could start bridging the gap between the integrated and open world.

The answer thus must be that as long an integrated approach keeps adapting to the changes in the marketplace, it is OK to keep it closed. And vice-versa, it is OK to keep an ecosystem open as long as it ensures the highest amount of flexibility in terms of adapting market changes as quickly as possible across all its constituents.

That later piece is difficult to achieve for open systems and I can see some of the value in what Steve Jobs is saying in terms of fragmentation: while the iOS experience is a closed system that provides a single, centrally managed experience that users can either support or reject, Android has become a very different world, where defining what Android is about is increasingly difficult: Is the Android experience what’s available on an HTC Android device? A Samsung one? Or it is what’s available in the latest version of the OS?

Open, at the end of the day, favors the development world but integrated (and, as a result, often more closed) favors the end user. Where you stand ultimately defines how you would view either.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title On Ecosystems. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

An abbreviated history of storage

Anyone who has used a computer has found themselves in the same situation: at some point, they have needed to take information off the computer in order to share it on another computer.

In the old days, this was done via diskettes, which were replaced by CDs, and eventually CDs were displaced by recordable DVDs and USB solid-state drives.

In the corporate (or prosumer) market, larger data needs led to the use of ZipDisk, Syquest drives, and eventually file servers.

As household increased their expertise in the tech space, we’ve seen the rise of Network Accessible Storage (NAS) devices for home use (for example, the popular Apple Time Capsule or the WD MyBook series).

Devices vs. Desktops

But over the last few years, the storage landscape has grown more complicated. As more consumers carry smartphones, portable media players, digital cameras, and camcorders, or play digital content downloaded for their televisions, the computer is loosing its dominance on usage of digital media. And, along the way, the computer is no longer the hub of everything digital in the household.

Digital content is now spread across that wide array of devices and will become increasingly untethered from the computer to the point where some household may remain heavy consumer of digital media without even owning a computer.

Meanwhile, in the business world, content sitting on employees’ computers is hard to find and harder to control. Laptops can walk away from a company with crucial company content on their hard drives so there’s an increase push to get users to save their information on centralized servers.

Enters the cloud

However, along with the spread of devices, there has been a growing spread in available bandwidth at higher speed. A decade ago, the majority of internet users were accessing it at speed of about 56kbps. Today, that number has gone up 100-fold and will continue to go up (by some estimate, the 100Mbps mark will be standard by 2020.)

With extra bandwidth to spare, data can now be stored more efficiently on remote servers.

In the consumer space, people are increasingly storing their videos on YouTube or Flickr, their images on Flickr and Facebook, and other files on the likes of Google Docs. Social networks are becoming a large repository of backup data that can be shared with friends or locked away.

And today, some solutions are allowing for such things to happen automatically from the devices to the web. For example, I use Eye.fi cards in most of my cameras, which dynamically upload the content of the camera to the online service(s) of my choice. They also have software based solutions that run on the iPhone and Android devices. Pixelpipe, one of their competitors, is software based only.

In the enterprise space, companies like dropbox, drop.io, and box.net provide solutions that store the files on their servers and allow end-users to access them from any computer or mobile devices.

Creation, Distribution, Consumption

Up until recently, I was pretty opposed to the iPad as a device, seeing it as a consumption only device. Over the last few months, as more tools have become available, we’ve seen a slew of tools allowing people to use the iPad in creative ways. My blind spot was to equal storage with creation and assuming that content was not stored locally, it would be issue from a creation standpoint.

But I was wrong.

In today’s world, content that sits locally is pretty much as good as dead. It is not distributed and thus is not consumed. This epiphany came to me not as a result of using an ipad but while authoring a story for my site. I realized that I was opening up my browser and launching a web app to do so. The same had been true for most of my week and I often can go days without opening a desktop app other than my browser. As a result, I’ve concluded that local storage is becoming increasingly irrelevant.

What is still relevant, though, is the existence of some form of local storage. In the future, local storage will be used primarily to hold content and application on a temporary basis before said content and app return to the cloud. The reason for such an approach is that running application locally will always be more efficient than running them over a network link.

Impact on consumer electronic

Probably more important is the final impact on digital media. The iPod was revolutionary in that it did away with the standard model of distribution for music: CDs are increasingly getting replaced by digital distribution and may continue to exist as a specialized domain (much like there are still some LP record purchasers today.)

The Kindle (and its competitors in the e-reader category) are starting to do the same thing to magazines, newspapers and books.

The iPad takes music, books, magazines, newspapers, TV shows, and other video content and runs them through a single device.

The same thing is about to happen to all video content. Today, companies like Netflix shuffle a lot of plastic back and forth so the plastic piece can be played on a specialized device (either a DVD or BluRay player) and then returned. Netflix has seen the writing on the wall and is increasingly trying to push its users (and providers) to move to a plastic-free world by streaming the media directly to the device of their choice. Much like kids today may not really understand the concept of rewinding a video tape, the kids of tomorrow will not understand the idea of putting something into a machine in order to play it.

As streaming distribution becomes more common, attitudes towards the disks will change so that such things are only catering to a much smaller audience.

My five-year-old son looks at DVDs as something you can decorate in art projects, not something you can play. His view is that everything is available on demand either via my computer, smartphone, or our connected TV (Try explaining to a 5-year-old that Wall-E is not available because it’s outside the release window set by the studios). With the advent of Apple TV and Google TV, his experience is about to become more common.

He’s the consumer of tomorrow and his view is that storage is something that happens in the cloud. In his teenage years, he might end up looking at USB drives with the same disdain as we look at videotapes.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The end of local storage. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

This week’s announcements of pricing around the Google TV offerings, combined with some of the first deliveries of AppleTV boxes, have kicked off a new salvo in the war for the third screen.

TV and web pre-history

Before I go into more details as to why I think this is important, I need to give newer readers some background in the history of the many failed attempts to merge the web and television.

In the early 1990s, in an era that is considered mostly pre-internet (that is, before the internet became mainstream), then vice-presidential candidate Al Gore talked about the “information superhighway,” a concept that highlighted a universe where most interactive data would move to your television. The TV screen has always been the main screen in American household and, unless you were a computer geek, that was largely the case in the early 1990s.

As the 1990s moved on and the commercial internet moved to the center of public consciousness, there were several attempts to marry the internet and the web (12 years ago, I was even involved in a failed effort at creating a standard web model for bringing TV to the web). The basic idea, at the time, was to bring TV content to the web and enhance it with some extra juicy bits from the web. This meant, for example, being able to push web content that would provide more info on a broadcast (for example, related news stories). The concept wasn’t new in that it had been embedded in a lot of British television since the 1970s as teletext, passing extra content as part of a broadcast.

Set top boxes wars

At the time, a group of engineers and product managers who had worked for Apple left the company and started a new offering called WebTV. WebTV was a new type of set-top box allowing its users to surf the web on their television. The company also introduced a set of specialized tags that web developers could use to create pages that were formatted to fit this new TV paradigm.

Others looked to the same concepts and, in the late 1990s, the set-top boxes became a new competitive arena for distributing content in a digital form (In order to disclose my biases, I must point out that I worked on a consulting basis for Nokia’s set-top boxes group, an effort that ended up having an impact on some of the thinking behind podcasting)

WebTV networks was acquired by Microsoft and much of its technology ended up in the Media Center edition of Windows, which powered the next wave of TV/web marriage.

Starting with Windows XP, Microsoft offered a Media Center edition of their Windows platform. The idea was basically Windows, on your TV. Unfortunately, the assumption that the PC experience could translate to a large screen proved to be mostly wrong (this, by the way, is a mistake that Microsoft also made on mobile devices, assuming, until recently, that the windows metaphor could transport itself to other experiences).

As the dotcom boom led to a dotcom crash, much of the intentions to merge the web and TV disappeared. The concept of converged content moved from the web to gaming stations as a delivery mechanism  (in fact, around 2006–2007, I was considering the Sony Playstation as an attempt to get BluRay to defeat HD-DVD instead of an actual delivery device). In the midst of a 3-way war between Sony, Microsoft, and Nintendo for gaming supremacy, Appled announce its first foray into the TV space with iTV (later to be renamed AppleTV). While they didn’t look at games as a space at the time, their model of attaching a device to the TV was no different then than the model they have today: the set-top box as a way to buy content from Apple. In that sense, the fact that the company hasn’t changed direction points to their belief that this is the right model (though I personally think that, in the long run, they will end up opening the marketplace further, in a fashion similar to what they did with the iPhone).

Internet Everywhere: 5, 15, 50

Over the last few years, as more video content has become available, the internet has moved back to being discussed as a delivery mechanism for many types of devices.

I call that the 5, 15, 50 paradigm, since internet content is now being offered on devices that have 5 inches screens (mobile devices), 15 inches screens (computers), and 50 inches screens (televisions).

Netflix has had pretty good success with their strategy of getting their player integrated in a lot of devices, thus allowing their content to be streamed pretty much everywhere if a connection is available.

Apple vs. Google

But now that the war is moving to that new ground, two players in the computer and mobile space have decided to fight for that corner of our digital lives: Apple is re-tuning its AppleTV box to be more competitive on a price level and Google is gearing up for a larger attack on the living room. In this case, however, I think that Apple has an early lead with some critical flaws.

The reason I believe Apple has an advantage here is that their offering, from a product standpoint seems to balance the right feature vs. price compromise. The Netflix and YouTube offerings are no-brainers but the reliance on iTunes as the delivery mechanism for your pictures and movies is annoying: I think that’s a critical flaw in that most people do not want to have to turn their computer and iTunes on in order to have access to that content. Apple should offer a way to attach a network drive (maybe a modified version of their time capsule) on which a user could drop pictures and movies, leaving them there for use from the Apple TV (or mac, iPhone, and iPod) at any time.

Google, on the other hand, is introducing a product that is just a more modern version of WebTV. And I’d warrant that, at this time, the keyboard interface approach is the wrong metaphor for the big screen. The keyboard on the first devices (Logitech Revue and Sony Internet TV) to follow the Google strategy are just too big (as the owner of a Logitech DiNovo Mini, the keyboard that’s modified for logitech’s enhanced offering, I can tell you that most normal people get confused by such an offering). This, in itself, would not be a killer as Boxee has demonstrated, with the remote for their boxee box, that a remote can have two sides, allowing for the complexity to be simplified.

Keyboard aside, however, GoogleTV will have a problem the price point ($299 for the Revue), which is too high for most consumer. Considering that Apple is pricing the AppleTV at $99, consumers may question what they get for the extra $200. Geeks like myself may end up buying something like the GoogleTV box but I suspect that the vast majority of the public will not.

Meanwhile, the incumbents in that space (cable companies, as well as Microsoft, Sony, and Nintendo) are not sitting on their hands and smaller players (Roku, Boxee) are looking to get a share of the market too.

The next set of battles will be waged for your living room and they are gearing up to be interesting as, for the first time in a very long time, TV may become more about the consumer than it is about the advertisers.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The revolution will be televised. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The tinkerer: Google

At Google, the algorithm knows  all. Their view is that data and computers are the best way to approach product design.

If a computer can do it, it is probably the best approach seems embedded in the thinking behind their product decisions, often resulting in products that appear bland but are used by millions of people.

A reliance on A/B testing

The net-net of this approach is a strong belief in A/B testing, where two versions of a page are shown to users, each with a very small set of changes. The one that results in the desired action ends up being the champion, moving on to the next round against another version, repeating the cycle time and time again. So, at Google, decisions are not made based on what the product manager or people at Google think but rather as a result of extensive testing. For example, an article in the New York times pointed out:

a product manager tested a different color with users and found they were more likely to click on the toolbar if it was painted a greener shade.

As trivial as color choices might seem, clicks are a key part of Google’s revenue stream, and anything that enhances clicks means more money. Mr. Divine’s team resisted the greener hue, so Ms. Mayer split the difference by choosing a shade halfway between those of the two camps.

Her decision was diplomatic, but it also amounted to relying on her gut rather than research. Since then, she said, she has asked her team to test the 41 gradations between the competing blues to see which ones consumers might prefer.

That type of extensive testing may be good practice (and it seems that it’s work well for Google to date) but it’s not the type of climate everyone necessarily likes.

Trust the data

In a way, Google’s trust in the data given to them by their consumers can be seen as a large influence in the way companies now design games. The whole social games movement, for example, is largely based on data mining and an understanding of interaction metrics.

Today, Zynga is arguably the most successful producer of social games in the world, thanks in large part to the initial success of Farmville. Zynga’s chief designer, Bryan Reynolds, recently explained how the company was using a data-driven approach to its design:

Zynga doesn’t rely on gut instinct to zero in on what users really want. Reynolds said Zynga follows an array of real-time metrics in order to find out what players like, and what they don’t.

One example was of a screen from FarmVille that promoted another one of Zynga’s games, PetVille. The font used in the promotion was originally red. By experimenting with other colors, the studio found that pink fonts, strangely, generated an exponentially higher click-through count than colors including purple, green, and red. Without metrics, Zynga would have never known that.

“Using the data mining, the metrics, you are able to learn the things that are counter-intuitive,” said Reynolds.

The impact can also be felt across most startups today as investors now require you to track and hit specific metrics. In a lot of ways, this is a saner approach to investment than what we witnessed in the 90s (when companies were getting funded based on potential exit instead of business basics) so one can’t complain about the concept but I would venture that balancing out metrics with other forms of input is also important in order to establish the best long-term strategy.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Which company are you: the Tinkerer. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

• The attacher is generally a company with a successful product. The company then tries to attach everything it does to that product, eventually losing out as the market evolves.
• The pusher finds the edge, goes beyond it and, when the inevitable push-back happens, pulls back a little. Having pushed beyond the edge, it starts the cycle again.
• The tinkerer creates products through extensive user testing and trust the data religiously, tinkering with the product based on what the data says.
• The refiner looks at a product category and offers an improved product by cutting back instead of adding.

Each of these models provides value to the market but ultimately, the best companies might be the ones that are willing to take on all of those features depending on time and context. In the following entries, I will go into details as to each of those models, providing example of leaders and startups that follow them.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Which company are you?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Netflix on channel 1

In a transaction estimated to cost Netflix about US$1 billion over 5 years, the DVD and streaming company partnered up with Epix, a cable and internet streaming channel backed by Paramount, Lionsgate, and MGM studios. Considering the fact that Netflix already has an established streaming relationship with Starz, a company that already has streaming rights to Disney movies, this means that Netflix now has a substantial portion of the recent blockbuster movies tied up for its streaming service (Fast Company reports that the combined box office market share of Epix backers was around 21%).

The deal carefully avoids create any controversies around DVDs to establish supremacy in the online streaming space. Netflix is betting, strategically, that the DVD business that brought it to where it is today is a buggy whip type business in a world that is slowly to moving to the cars-like business of online streaming. Now that the netflix player is embedded in a series of devices that allow for streaming across a large footprint (computers, TV and, soon, mobile devices), the company is building up its content catalog.

What Netflix is doing is basically creating a new “on-demand” channel that can sit next to the other channels on a TV screen. The company is sidestepping “appointment viewing,” which requires people to set a particular time and date to see a particular piece of entertainment, to provide instead the equivalent of an always-ready, always-on-demand format of entertainment viewing (kind of like “there’s a movie for that”). It’s a future AT&T predicted in 1993 (as an interesting aside, that very ad campaign was also one of the first banner ad campaigns on the internet) and the company to bring it to you is Netflix.

Basic Internet Tenets

Regular readers of tnl.net will recognize the trend of everything moving to an IP stack. I’ve long held the view (at least since 2004, according to this entry) that cable channels ought to be delivered a la carte over the internet and Netflix may be the first company to successfully deliver an internet-only on-demand channel.

This model, however is predicated on a few key tenets that have made the internet such a great arena for innovation:

• The internet is a level playing field: Large companies do not have an advantage over smaller ones as everyone gets the same level of access to internet resources, no matter whether they are two guys in a garage or a multinational corporation.
• The internet allows any platforms to connect: There is no discrimination on what type of device can connect to the internet, as long as the device respects rules around addressing (getting a unique identifier on the net) and respects every other devices on the net. As a result, computers are seen no differently than mobile phones, TV set-top boxes, game stations, watches, coke machines, or whatever anyone willing to agree with the basic rule set attaches to the net
• There is only one internet: The minute you agree with the basic tenets of the internet, you take it upon yourself to continue supporting them if you want to be part of the internet commons. You are free to leave the internet and go to another network if you want to but you cannot call that the internet if it’s a different network.

A different view

But not everyone seems to agree. Earlier this week, Google, a company that has greatly benefited from the current tenets of the internet, decided that now that it was a large company, it could throw the internet under the bus by breaking some of those very tenets.

In a joint announcement with Verizon, the company proposed a compromise on net neutrality discussions that starts out with the right concepts and eventually gets off-track to a point where the basic tenets of the internet would no longer be valid.

Before I go into the details of what’s wrong with the proposal, let’s first look at what’s right (although I have to take what they say with a grain of salt since I’ve trusted the company in the past only to see it turn its back on earlier announcements):

A broadband Internet access service provider would be prohibited from preventing users of its broadband service from:

1. sending and receiving lawful content of their choice;
2. running lawful applications and using lawful services of their choice; and
3. connecting their choice of legal devices that do not harm the network or service, facilitate theft of service, or harm other users of the service.

I would have some questions on the definition of “harm” here but, for the most part, these seem to be points that could be agreed upon.

The lines would also carry a non-discrimination principle that are, for the most part OK, except for the following sentence (emphasis is mine):

Prioritization of Internet traffic would be presumed inconsistent with the non-discrimination standard, but the presumption could be rebutted.

I would argue that striking those last 6 words would make the rest of that section OK.

The next section is about transparency and the proposition of providers telling people when they do discriminate or make other modifications seems sound.

However, it starts going downhill from there. Provisions like network management (a tricky area that ends up being the place of most disagreement), additional online services, wireless broadband and case-by-case enforcement give up on the notion of the internet as a simple (or stupid) network.

It is true that network management is necessary to the proper functioning of the internet commons but, as Barbara Van Schewick (via Fred Wilson) points out, there is a simple rule on dealing with net neutrality:

A non-discrimination rule that bans all application-specific discrimination, but allows all application-agnostic discrimination. Discrimination is application-specific if the discrimination is based on the specific application or content (e.g. Skype is treated differently  from Vonage), or based on classes of applications or content (e.g. Internet telephony is treated  differently from e-mail).

The main challenge in Google and Verizon’s proposal is the idea of a differentiated internet. If the first two components of their proposal (consumer protection and non-discrimination) were considered valid, the rest of the policy framework would be invalid. One cannot say in the same sentence that a broadband provider is prevented from allowing users and applications almost unfettered access to the net and then turn around to say that this may not be the case for new applications or parts of the net.

Like it or not, the wireless internet is part of the internet. While there are parts where it can be controlled, internet is still a word that works as singular and has no plural. Anything else (a differentiated network) is not the internet and don’t let people tell you otherwise.

Motivations

So what motivated such proposal? Well, first of all, it appears that there are a number of strategic areas where Google could do well in appeasing the telecom and cable industry:

• The Android OS is a natural fit here as Google is working on ensuring that it will do better than Apple in the mobile space.
• GoogleTV is another arena where the company would benefit from sitting on a “differentiated network” where it could serve content as a premium package. In its fight with Apple (Apple’s business model is still largely predicated on selling hardware, like AppleTV), Google could offer an advertising-sponsored model carried on differentiated pipes.
• Of course, another arena would be wherever there are tools that are potentially threatening Google. For example, pictures from Picasa could be served at a faster rate than pictures from Facebook on that network. Or movies from YouTube could get priority access over movies from Netflix.

So, having established that Google has much in terms of alignment with the telco industry, it is now time to question whether its motives are truly in line with its previous policy of not being evil or whether they are better aligned with pure profitability motives. The decision could allow the internet to grow or the world to return to the pre-internet world of balkanized networks.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The internet at a crossroad. You can follow him on twitter here or receive his weekly newsletter by subscribing here.