Month: January 2008

My friend Kara Swisher at All Things D has some juicy details from a recent all-hands meeting at a theatre near Facebook headquarters in Palo Alto. Apparently the shyness that Scoble remarked on when he met Mark Zuckerberg in Davos must have been a temporary thing, because it sounds like Marky Mark was more than happy to chatter about the dollars flowing through Facebook’s bank account.

Apparently the site is expecting to have revenue of about $150-million for last year, which was widely expected. But Mark said Facebook is looking for twice that this year, if not more. And he’s going to need all that revenue, because he also said capital expenditures are going to be about $200-million. For what? Maybe some more telephone operators to handle all the switchboard calls when they unveil the next Beacon. In any case, as Kara notes that will leave the site in the hole cash-flow wise.

But what does Mark care? He got $300-million or so from Microsoft and Li Ka-shing and people like that, and his company is valued at %15-billion, which means he’s worth a few billion at least. Good times.

One interesting point from Google’s much-discussed quarterly results: Eric Savitz of Barron’s Tech Trader Daily blog notes that the company’s CFO said Google’s “social networking inventory is not monetizing as well as expected.” In other words, the social ads they’ve been running through MySpace and elsewhere? Not so much. That’s apparently why the company’s TAC or “traffic acquisition” costs (otherwise known as marketing) were higher than expected.

As Eric notes, this could make a lot of businesses that are counting on some form of social advertising quite nervous — including Facebook, presumably. I have to say, I don’t think that “social ads” are quite as simple a beast as some companies and marketers are thinking (or hoping) they are. In fact, I’m starting to think that there might even be an inverse relationship: to the extent that they are social, they’re not really ads, and to the extent that they’re ads, they’re not really social.

It must be tough when you just keep beating estimates quarter after quarter, like Google has done ever since it became a public company — until now. Revenues and profits have continued to rise by the mid-double digits pretty much every time the company reports, and along the way plenty of people have become accustomed to the idea that it will continue more or less forever. And most of those people have been selling in the wake of the company’s much-ballyhooed “miss.”

A couple of things: 1) This is partly Google’s own fault for not providing “guidance” to analysts about how its business is doing, the way most companies do (that is, if Larry and Sergey and Eric even care, since they focus on the long-term and aren’t concerned with quarterly results, as they told us in the prospectus). 2) Describing financial results that came in a penny lower than estimates as a “material miss” is overstating things more than a little, I think — and revenues were only 1.7 per cent lower than estimates, which were likely jacked up anyway.

As my friend Paul Kedrosky pointed out to me, the reaction of Google’s stock — which was down by as much as 9 per cent in after-hours trading — is likely as strong as it is because a) this is the first miss in Google’s history and b) it makes people nervous about how much of an effect the weak U.S. economy and advertising market are going to have on the company in the future. Perhaps some of those who said Google was immune to downturns might be regretting their sanguine comments.

At the same time, however, I think calmer heads should remember that Google’s stock has already dropped by about 20 per cent from its recent high, and that after-hours trading is often the province of nervous Nellies who sell at the first whiff of trouble. It sure doesn’t look to me as though Google’s business is coming apart at the seams.

In one of the least-surprising legal moves in recent memory, Swedish authorities have laid charges against The Pirate Bay, one of the largest trackers of BitTorrent downloads in the world (it recently passed the 10 million peers mark), on behalf of several movie studios and record labels. This isn’t surprising for a number of reasons. For one thing, the Swedish authorities have said several times over the past few months that they were going to file charges; and for another thing, the site’s name is The Pirate Bay — I mean, come on 🙂

At first glance, it seems obvious why Swedish prosecutors are suing the company. After all, by going through The Pirate Bay, people can get access to millions of movies, songs, software programs and other digital files, and download them freely without paying for them. The sticky part, however, is that The Pirate Bay doesn’t host any of those files — like Google, the site is nothing but an index of where those files are located. The actual files are hosted on millions of computers around the world, some of which may only have a small part of the original file, thanks to the magic of BitTorrent.

In other words, The Pirate Bay is only pointing Internet users to those files, in the same way that Google and Yahoo and MSN point users to webpages. Is that — or should that be — a crime? In a similar vein, a music search engine called Seeqpod is being sued by the record label EMI because it makes it easy for people to find public mp3 files on the Web (there are half a dozen other services that do the same thing, including Songza and g2p.org). Should that be illegal? G2P.org actually just does a search through Google. If that’s illegal, does that make Google responsible?

Even if The Pirate Bay is successfully sued, it isn’t likely to affect downloading much. The site may have the largest torrent “tracker” in the world, but it isn’t the only one — there are thousands of them. Even if The Pirate Bay is found guilty and goes out of business, the servers that run the site aren’t actually located in Sweden and will likely continue functioning (The Pirate Bay claims to not even know where the servers are). The founders of the service say their tracker will remain operating even if they are found guilty.

I’m having some trouble getting excited about the announcement that Meebo Rooms can now be easily embedded into websites and blog pages (you could embed them before, apparently, but it wasn’t easy). I get the fact that Meebo.com makes it easy to chat, and I know that its Web-based IM service is hugely popular — particularly with people who have instant messaging blocked at work or school, as many of us do.

But the whole “embedded chat room” thing just doesn’t work for me. Maybe it’s because there have been — and are — dozens of companies doing pretty much the same thing, including 3bubbles.com (remember them?), Gabbly, Mobber and a whack of others with equally ridiculous and forgettable names. Heck, my friend Brent Ashley whipped up an Ajax chat room widget back in 2002 called BlogChat. It’s not technically that hard (no offense, Brent), so what is compelling about it?

I guess like Pete Cashmore, who wrote about 3bubbles when it came out, I just don’t get the whole dedicated chat room idea. Most of the chat room apps I’ve tried on various sites (including mine) wind up filled with idiots, or are ghost towns where there hasn’t been a chat message for weeks, and the last one was someone typing “Hi, is anyone here?” I could see it for a dedicated situation such as a conference or some other compelling event, but how many of those could there be?

Nicholas “The Voice of Doom” Carr has another one of his periodic columns about how the Internet is ruining everything, and in it he manages to somehow yoke together the evils of GPS navigation systems (because they send people through small villages, apparently) and surfing webcams. What do they have in common? Well, they’re both ruining things for the people who deserve to have them all to themselves. If that sounds a little elitist, then you know you’re reading Nick Carr.

The common theme is that the Internet “rewards the lazy and punishes the intrepid,” according to Nick. Not only are GPS systems sending drivers on shortcuts through charming villages — where they become “child-killers,” according to one article he cites — but they are apparently going to get so smart that they will just replace existing traffic jams with new and smarter traffic jams. This, Carr says, will penalize the smart people who spend their time poring over maps looking for shortcuts, who presumably deserve to keep those shortcuts to themselves.

Then there’s the surfcams. Same story there: surfers are mad because all the really good spots are getting overrun by the riff-raff and hoi polloi, who find out about the big breakers via Internet webcams. How dare they? Nick throws a bone to Internet fans with a paragraph that says there’s “much to be said for the easy access to information that the internet is allowing,” etc., etc. — but you can tell he doesn’t really believe that.

Nick says he’s worried about whether, as the Internet makes more things known, “the bolder among us will lose the incentive to strike out for undiscovered territory.” But isn’t sharing your knowledge about such things part of the fun of finding them? Not for Nick, apparently. Maybe we could share that kind of thing with a few other bold types, provided we like the cut of their jib or whatever, but not with the riff-raff. Come to think of it, maybe we should copyright those shortcuts and surfing hotspots. There’s an idea. What do you say, Nick?

(This is a column I wrote that appeared in the Globe today. I’m reposting it here for anyone who might have missed it).

Want a snapshot of an industry in crisis? Take a look at the music business right now. If you can see any signs of a coherent strategy, feel free to e-mail me and let me know what it is. If the word “crisis” seems a bit too apocalyptic, maybe it’s better to think of it as an evolutionary process. Even so, the industry’s current turmoil is a sign of just how brutal evolution can be.

As it stands now, some of the labels seem willing to give their music away for free in certain cases – with a newspaper, for example (the New York Daily News just did such an MP3 giveaway deal with EMI), or on a cellphone (Nokia is working with Universal Music on a plan to provide phones with free music service included) – but not in others.

Some of the four major labels seem to have abandoned DRM (digital-rights management) restrictions, at least in certain situations: EMI now sells DRM-free tracks on iTunes, and all four are selling some of their content without DRM restrictions through Amazon’s music service. But most of the music on iTunes is still locked up with DRM, despite Apple CEO Steve Jobs’ plea that DRM be removed.

Some labels are suing online media services such as YouTube – as well as SeeqPod.com, a music search engine, and MP3tunes.com – while others seem willing to cut deals with online companies. Some are exploring new models of online delivery, while others appear content to continue filing lawsuits against downloaders.

Continue reading “Music: Snapshot of an industry in turmoil”

Patrick Ruffini at Tech President has a great post about Twitter starting to become a news-delivery system, a post I came across because it was linked to by Josh Catone over at Read/Write Web, who says Twitter is becoming a “platform for serious discourse.” Not all of what we see on Twitter is serious discourse, mind you — there are still people who insist on telling me everything they’re doing (yes, I’m talking about you, Scoble) and there are performance issues, but Patrick and Josh both have a point.

Like Patrick, and probably lots of other people, I started noticing Twitter becoming a news-delivery system when a news event came along — like the fires in California, or the death of Heath Ledger — and probably noticed it the most during the U.S. primaries. The volume of Twitter posts during the debates and the voting was incredible, and it was like a front-row seat to the action, or a really smart water-cooler discussion. Some people were watching CNN, some watching other shows, some were at actual events; it was a sea of information and opinion.

Josh has a great rundown of why Twitter works for news, including the fact that it’s fast, it’s open, and it’s two-way — and Patrick makes many of the same points. Like Mitch Joel, I have found out about news events through Twitter, including several takeovers, financial results and other stories. And journalists are taking note, including Steve Outing and Jack Lail, as well as Bruno Giussani. Newspapers are feeding their news alerts straight to Twitter, and reporters are starting to do likewise. It’s fascinating to watch a new medium evolve the way Twitter has.

Okay, so the guys behind Uncov — the hilariously snarky and bitchy tech site that reminded me of Suck (for those whose memories extend back to the first bubble) — have launched their own tech company: a personalized news aggregator called Persai that is currently in beta. Why do I have the overpowering feeling that this is going to end badly? Oh, I know why. Because at least half a dozen other companies have tried to do exactly the same thing and failed miserably, that’s why.

Don’t get me wrong. I don’t want to say that just because someone — or even a group of someones — failed at something, that means the guys at Persai can’t succeed. Maybe they can. Maybe they’re that much smarter than Greg Linden, who founded Findory, or Ian Clarke, who was behind Thoof. Maybe they have some kind of secret sauce. Not to mention the fact that I’m only going on what has been reported about Persai.

All that said, though, I have to think that the odds are stacked against these guys. A personalized news aggregator is an idea that has been around forever, and plenty of people have tried to make it work, and yet — well, it doesn’t. Not as a business, anyway. Still, more power to you guys at Persai. I still think you should have stuck with the hilariously bitchy blog idea. Maybe not a big moneymaker, but way more fun.

Jeff Zucker, CEO of NBC Universal, did the opening keynote at the National Association of Television Program Executives in Las Vegas and talked about how — surprise, surprise — the industry is “under pressure.” I’ll bet that got some big laughs. It’s probably also not that surprising that he didn’t spend much time talking about the writers’ strike and its effect on the industry, although he did drop in that old line about “trading analog dollars for digital pennies,” just for good measure.

The part that I found really striking, though, was near the end, where Zucker starts talking about how he thinks the system of making dozens of expensive — and ultimately futile — TV pilots is a dumb way to do things. And when you listen to the numbers involved, it’s hard not to agree: The big five networks spent $500-million last year on about 80 pilots, he says, of which only eight were brought back for a second season. And even among those, “none could be considered a big success.”

What kind of crazy business spends a half a billion dollars on 80 prototypes, and gets less than 10 per cent that actually work? That might make sense if you’re an experimental research lab — preferably government funded, so that your success rate doesn’t actually matter — but shouldn’t the mass-market TV business have a bit better idea of what it’s doing than that? I assume that every one of those was greenlighted by someone who hoped they would get a monster hit like CSI or Law & Order, and then they could afford to write off all the other losers.

If I were a TV executive, I would put down the crack pipe or whatever they’re smoking over there and put some small amounts of money into a few Webisodes, or maybe look around at what’s catching the eye of my target market at FunnyorDie.com or Break.com or places like that. Finance some things on the cheap and then turn them into something when they take off — flushing billions of dollars down the drain on pilots in hope that you’ll magically hit the CSI jackpot is insane.

I’ve been taking part in the beta trial of SugarSync, the content-synchronization service that allows you to synch photos, documents and other content across multiple PCs, mobile devices etc. (the service was formerly known as Sharpcast, and only syncrhonized photos). I’ve got a limited number of beta invites available — if anyone wants one, post a comment with an active email address and I’ll shoot you the link.

I’m glad Mark Hopkins from Mashable wrote this post about Imeem — which just bought Anywhere.FM, a startup from YCombinator — and MP3tunes, the online music-sharing service from serial entrepreneur Michael Robertson (founder of Linspire and the original MP3.com). I’ve been watching the back-and-forth between Michael and Imeem CEO marketing VP Matt Graves on the Pho list with interest, since MP3tunes is being sued by EMI and Anywhere.FM does something very similar.

As Mark explains in his post, Michael asked the Imeem VP for his views on the legality of what Anywhere.FM does, and Graves said that he didn’t want to talk about the terms of the Anywhere.FM deal “now or ever, on the list or privately,” although he said he was sorry Michael was being sued. Robertson then responded that he just wanted the Imeem exec’s thoughts on whether the service was legal, and if so why — and was obviously interested in finding an ally in his lawsuit with EMI.

Graves shut this line of inquiry down as well, which I must admit I find odd. There’s no question that in the past Michael — rightly or wrongly — has been a lightning rod for lawsuits related to his various online services, but how does it help to avoid the issue? If Anywhere.FM and MP3tunes are similar services, and one is being sued by a record label, doesn’t it stand to reason that the other might as well? Perhaps Graves thinks he can avoid such an outcome so long as he doesn’t talk about it.

I wrote about the EMI lawsuit in this post, and linked to Michael’s overview of what the lawsuit is about, which is well worth a read. In a nutshell, EMI claims that an MP3tunes feature called Sideload is illegal, and so are the online music “lockers” that the company provides, where users can store songs — including songs that they have purchased through Amazon or other online services, which can be transfered directly into the locker. Sideload is much like Seeqpod (which is also being sued) or Songza.

I watched this clip of Mike Arrington on the Fox Business show Happy Hour, with Cody Willard and Rebecca Gomez, and the one thing that struck me was how smart and reasonable Mike seemed compared with the frenetic — almost manic — Willard and his sidekick.

[youtube https://www.youtube.com/watch?v=_-og4F6eNko&rel=1&border=1&w=425&h=373]

More to the point, I think Mike’s long-range outlook on Yahoo is correct: the company has to figure out how to grow its online-advertising business, or surrender it to someone who can.

As expected by just about everyone, Yahoo released fairly lacklustre numbers late Tuesday — and also used a word that you should try never to use in an earnings outlook: “headwinds.” As Rob Hof notes at BusinessWeek, this is code for “results are going to suck until further notice.” The stock was off about 10 per cent in after-hours trading, and that took it down near $20, or 40 per cent lower than it was three months ago.

Henry “I used to be a famous Wall Street analyst” Blodget has a pretty good rundown of the numbers at Silicon Alley Insider (although I must admit that every time he does that kind of thing I wonder whether he isn’t getting a little close to the line, given his settlement with the SEC). The fact is that Yahoo is cutting 1,000 people — as was widely rumoured last week — and its future guidance was so-so at best.

Share of the search market flat or falling, profit margins lower, new deals with cable companies bringing in lower revenue — not a pretty picture. but Yahoo still has high hopes, according to Sue Decker. Unfortunately, Yahoo shareholders have had some pretty high hopes as well, and about all they have to show for them so far is a share price that has been sliding down the slippery slope for the past year.

“It’s such a fine line between stupid and clever.”
David St. Hubbins, This is Spinal Tap

Google is apparently experimenting with tiny barcodes that will sit next to newspaper advertisements and be scannable by mobile phone, so that you can “read” the code and be whisked to some website where you can get an interactive coupon, a special deal on Star Wars memorabilia, etc. Apparently I’m not the only one who immediately had visions of the CueCat, an ungainly handheld scanner gizmo that some ridiculous company tried to foist on newspaper readers back in the first bubble.

In the comments on a Silicon Alley Insider post about the Google experiment, Henry Blodget says that CueCat was the single worst idea he ever heard during Bubble 1.0 — and that’s saying a lot. I would have to agree (Allen Stern of Centernetworks, however, says that he thought it was a pretty good idea, and still has one in his closet). If you want some technical information, there’s some at the Google FAQ.

I know that there are a lot of people who are going to point out that they use barcodes like this all the time to buy things in Japan, but I would like to point out that not everything that is popular in Japan is good, and in support of that I would offer this and most of these.