Category: Gigaom

Facebook’s initial public offering is one of the most eagerly anticipated technology IPOs since Google went public in 2004: It is a launch that values the social network at more than $100 billion, and it has sparked a number of debates about the future of the company, including whether social advertising is effective or not and whether the company is failing to take advantage of mobile properly. But there is another issue investors should be concerned about when they look at Facebook, and it is arguably even more important than any of these operational questions: namely, the iron grip co-founder and CEO Mark Zuckerberg has over the shares of the company.

For someone who only just turned 28, Zuckerberg wields an almost unprecedented amount of power over the fate of Facebook — not just over the votes that go along with shares of the company but also over the board of directors. The secret to this tight grip is buried in the history of the social network and in particular in the advice Zuckerberg received from former Napster founder Sean Parker, who was a mentor to the Facebook founder and at one time was president of the social network. The implications of what he helped Zuckerberg construct are profound and create a substantial investment risk.

Sean Parker helped Zuckerberg take control of the company

Long before Facebook became the giant it is today, with almost a billion users and revenue of more than $2 billion, Parker advised its young CEO that he should do everything he could to hang onto control of his company. This advice was based on Parker’s own experiences at Napster and another company called Plaxo, where he was removed by the board. So when Facebook took its initial funding round in 2005, he convinced Zuckerberg to push for control over two seats on the board of directors. And when Parker left the company that same year (after some bad publicity over a drug charge), he gave Zuckerberg his seat as well.

That gave the Facebook CEO control over three of the company’s five board seats. But that was just the beginning: In 2009, the board (which he controls) created a new class of “super-voting” shares that have 10 votes per share, compared with the single vote normal shares have. Through his ownership of a chunk of these super-voting shares, Zuckerberg controls almost 30 percent of the votes in the company. Plus, he has proxy agreements with a number of other shareholders, including co-founder Dustin Moskovitz, that give him control over their shares as well.

In all, these various arrangements give the Facebook CEO control over the board of directors and about 58 percent of the votes in the company. If Zuckerberg decides to do something, he doesn’t even have to ask for permission from the board or put it to a shareholder vote (or if he does the latter, he knows he can prevail). Investors got a tangible example of what this means last month, when Facebook announced it would be acquiring the hot mobile photo-sharing service Instagram for $1 billion. According to a number of reports, Zuckerberg told the board of directors about this billion-dollar deal later — via email.

Super-voting shares are popular, but are they wise?

The visionary founder who controls the progress of the company he founded with an iron fist has become a Silicon Valley archetype, thanks in large part to Apple CEO Steve Jobs, who was famously ejected from the company he co-founded due to his erratic behavior. He returned later to rescue Apple from certain disaster and transform it into one of the most valuable companies in history, giving every startup founder a reason why he too should be allowed to control every aspect of his company, regardless of things like shareholder rights.

Google also helped popularize the idea of multiple-voting shares, which gave co-founders Larry Page and Sergey Brin and former CEO Eric Schmidt effective control over the company. In Google’s offering prospectus when it went public in 2004, the co-founders argued this kind of arrangement was necessary in order to ensure Google remained true to their long-term vision rather than getting sidetracked by questions of short-term financial value.

A number of other tech companies have chosen this same route, including both LinkedIn and Zynga. They have also made the argument that dual-class shares are necessary to protect the company and its vision from the vagaries of the daily stock market. (What many of these companies don’t say is that such structures also make it a lot harder to acquire the company, something that has made multiple-voting shares popular with media companies such as the New York Times and Washington Post.)

Multiple-voting shares are a double-edged sword

So why should investors be wary of multiple-voting shares? Because while they protect the long-term vision of the founders of a company, they can also protect the founders from the kind of shareholder action that is often necessary when a company loses its way. Yahoo and AOL, for example, have both been the target of lobbying efforts by activist shareholders who argue they have been mismanaged and that their share price has been damaged. If either AOL or Yahoo had provisions like Facebook does, there would be no hope of ever changing anything at either company.

As a number of shareholder-rights groups and activists pointed out in advance of Facebook’s IPO, tapping the public markets for funding is supposed to bring with it certain responsibilities on the part of corporate executives — including a duty to be answerable to common shareholders and for any failure to act in the best interests of those investors. If companies don’t want to abide by those rules, the argument goes, they should remain private and seek funding from banks or private venture-capital groups.

In a recent report about Facebook’s voting structure, the activist group Institutional Shareholder Services said the dual-class structure is “an autocratic model of governance” that makes Facebook “less viable than a competitor whose governance gives owners a voice proportionate to the economics they have at risk.” The group also criticized the growing trend for such super-voting shares, saying, “Facebook appears to have taken the same outdated dance lessons as many other recent tech sector debutantes.”

Having Zuckerberg control 58 percent of the votes at Facebook isn’t likely to be a problem for anyone as long as the company is making smart decisions about what to do with its money and as long as the stock price is going up. But if it starts to go south and Facebook makes some unwise decisions, it will become obvious that such voting structures are a fair-weather friend: They are great to have when things are going well, but they can become a huge liability.

Before Steve Jobs had even passed away, people had already started playing the “who is the next Steve Jobs” game — trying to come up with names of technology and design visionaries who might be able to don the mantle of the Apple co-founder and CEO. Jeff Bezos of Amazon? Napster and Spotify founder Sean Parker? Those names and others have been floated by industry watchers, but listening to Twitter and Square founder Jack Dorsey at GigaOM’s RoadMap conference on Thursday made me think that he is at least as strong a contender for that mantle (if such a thing even exists) as any of them. Could Dorsey change the way we interact with technology and the world around us in as profound a way as Jobs?

Why do we even need an heir to Steve Jobs? The obvious answer is that we don’t. Jobs was unique, in both positive and negative ways, and the precise combination of those features made him who he was and thus made Apple what it was. No one is going to be the next Steve Jobs because they will have a different combination of strengths and weaknesses, and they may not be as lucky or as smart in specific ways. But when it comes to the role that Jobs played in technology — the role of visionary designer, creator, instigator and disruptor — we need those people more than ever, because visionaries inspire others, even if the things they do themselves don’t always succeed. They change the way we look at the world in fundamental ways.

I haven’t spent a lot of time around Jack Dorsey, but based on his conversation with Om at RoadMap, he clearly spends a lot of time thinking about the big picture behind the technology that he is involved in. So it’s not just about Twitter and how it works — or what it looks like or even how to monetize it — but how it connects us to our own “humanness” as he put it, and enables us to experience things and see through the eyes of others. He described how he found this an incredibly powerful thing during the protests in Iran, and I think others have had a similar response to the events of the Arab Spring and the earthquakes in Japan and Haiti.

And when it comes to Square — the other company that Dorsey is helping to shape and create — it’s not just making payments easier or more efficient that interests him, but how making that easier can help artisans and individuals become fully functioning businesses more easily, and how that could help change society.

Dorsey’s roles with two very different companies have also sparked some comparisons to Jobs, who helped revolutionize animated films with Pixar while also changing the personal electronics industry at Apple (the differences between Square and Twitter are arguably even more dramatic than Pixar and Apple, since Square is a device that people pay for and Twitter is a service). And Dorsey was also forced out of the company he founded, much like Jobs was — after a dispute with former CEO Evan Williams, who funded the company in its early years — and then returned to become the product visionary.

One of the things that is very different about Dorsey and Twitter stems from the fact that Twitter is a service rather than a product. Under Steve Jobs, Apple excelled at product design, but it has been notoriously inept at anything service related: iTunes, to take just one example, is a total mess when it comes to usability and design despite years of evolution, and things like Ping have effectively been stillborn. One of the most powerful things about Twitter, however, is the way in which the service was transformed by its users, with additions like the @ mention and the retweet — features that were never even imagined by its creators. Steve Jobs, by contrast, wouldn’t even let people replace the battery in his products.

From what I can tell, Dorsey also seems to be missing what could charitably be called the “difficult” elements of Jobs’ personality (other people have more blunt terms for it), which are detailed in Walter Isaacson’s biography: the shouting, the merciless humiliation, the ruthlessness even with friends, the crying in meetings, and so on. One of the questions that this description of Jobs raised for me is whether those things were a necessary part of his success as a visionary and designer, or were they simply character flaws? Would Apple products have been the same, or been as revolutionary, if he were a different kind of person.

So is Jack Dorsey the new Steve Jobs? Probably not. But that said, he clearly has a vision about two fairly significant areas of the technology sphere — the way in which even a simple service like Twitter can change the way we interact with each other and distribute information in a digital and connected world, and the way a simple payment service like Square can potentially transform entrepreneurialism and small businesses. And he is thoughtful about the implications of those things in a way that many product or business-focused technology executives are not (he even has a fascination with the application of Zen Buddhist principles to design, as Steve Jobs did).

Dorsey has already altered the media landscape with Twitter — whether he knew that was what he was doing or not. And he is trying to alter the payment landscape as well with Square, which could ultimately help make it easier for entrepreneurs and small businesses to get paid. Whether those changes will be as massive and transformational as the ones Jobs unleashed remains to be seen, but we could definitely use more visionaries.

A decade ago, Microsoft finally settled a long-running antitrust case that was launched against the software giant by the Department of Justice, based on accusations that the company was using its monopoly on computer operating systems to crush competitors. Now it is Google’s turn to face the antitrust spotlight: Although it is not the subject of a formal government case yet, the search behemoth is involved in an official inquiry by the Federal Trade Commission, which is investigating whether Google is distorting the market for web search and search-related advertising.

What makes this case more difficult than the one against Microsoft — and ultimately a lot harder to prove — is the question of what a monopoly even means in the age of the web, when the browser has taken over from the operating system as the primary way in which we use our computers and mobile devices. Does Google have a monopoly in any real sense? And if it does, can it be shown that the company is using that position unfairly, causing harm either to competitors and/or to consumers of web services?

Critics of the company argue that both of these things are true. And the list of Google’s enemies is a fairly long one, including fellow giants like Microsoft — one of the main proponents of the antitrust allegations, somewhat ironically — as well as large web services like Expedia and the recommendation service Yelp, who argue that Google is giving its own competing services preferential treatment and thereby distorting the market. And Google isn’t just facing antitrust inquiries in the U.S.: It is also under investigation in several European countries for similar alleged offences.

A monopoly on search and search-related ads

The charges being leveled at Google are twofold. One is that it has a monopoly on search and on search-related advertising and that this gives it an unreasonable amount of control over how content is found online — since search is the primary way that many people discover websites and services — as well as an ocean of cash from search-related advertising. The second allegation is that Google uses the money from its advertising monopoly to develop or buy services that compete with those from other companies and that it then uses its control over search to give those services preferential treatment in its search results, which provides an unfair advantage.

So in the case of Yelp, whose founder and CEO, Jeremy Stoppelman, testified in a recent Senate hearing regarding Google’s behavior (which wasn’t part of the official FTC investigation but raised many of the same issues), the claim is that when Google couldn’t acquire the company for its local recommendations, it first tried to steal Yelp’s content and use it without asking, threatened to remove Yelp from Google’s search results altogether and then bought a competing service called Zagat.

This effectively pulls in all the different aspects of the antitrust case against Google, to the extent that there is a case: the use of its giant cash reserves to try and take over Yelp; the “scraping” of Yelp’s content for use in Google’s own local service, Google Places; the pressure on Yelp to play by Google’s rules or face deletion from its all-powerful search index; and finally, the acquisition of a competitor, to which Google is allegedly giving preferential treatment in its search results. Expedia made similar allegations about Google following its purchase of ITA, which provides travel-related information that is used by Expedia and other services (a deal that was reviewed by the FTC).

Having a monopoly isn’t enough for antitrust

As I tried to explain in a recent GigaOM post, antitrust law in the U.S. doesn’t make having a monopoly in a particular market illegal. What the Sherman Act is designed to fight are monopolies that have been achieved through illegal means (i.e., collusion or restraint of trade) and/or monopolies that are being used to harm a particular sector. But it’s even more complex than that. Unfortunately for Yelp and Google’s other critics, it’s not enough just to show that a company with a dominant market position is being unfair to its competitors. It has to be proven that being unfair has some tangible impact on the market, either by restricting choice or raising prices or both.

So Yelp might argue that Google is being unfair by a) taking its content without asking and b) giving its own Zagat results a higher ranking in search (assuming it can even be shown that Google is doing this). But does Google’s behavior have any impact apart from being unfair to Yelp? Does it restrict consumer choice when it comes to recommendations services in any real way? And if it does, will consumers have to pay more for those services? Similar questions would have to be asked about Google’s dominance in search itself or search-related advertising. Does that dominance affect consumers in a tangible way?

Thomas Barnett, the former head of the Justice Department’s antitrust division, argued in a presentation to the Senate committee that Google’s control over search-related ads would lead to higher prices for those ads and that consumers would pay more because the companies buying those ads would inevitably pass those higher costs on to their customers. But this is not obvious at all. Even if someone could prove that prices for search ads are higher than they should be (whatever that means), an antitrust case would then also have to prove that companies were passing those costs on instead of just absorbing them.

One of Barnett’s counterparts, a former antitrust specialist with the New York attorney’s office who worked on the Microsoft case, argues that Google simply doesn’t fit the description of an illegal monopolist in the same way that Microsoft did. One of the main reasons for this is that Google provides a web service that is free to anyone and that has multiple well-funded competitors (including Microsoft itself). Users are not forced to search in Google, nor are they forced in any real sense to pick Zagat’s reviews over Yelp’s, or Google Travel’s results over those from Expedia or Travelocity.

Dominant web players rarely last long

I’ve argued before that one of the most powerful arguments against a federal antitrust case against Google is that such investigations rarely have much impact, in many cases because they drag on too long and involve so much complicated testimony that is difficult to prove. Also, the market for technology itself usually does a good enough job of destroying or disrupting monopolies without the government’s help. A research paper that looked at several high-profile cases, including Microsoft’s and AT&T’s, came to a similar conclusion. In almost every case, technological change had more of a tangible effect than any government investigation or penalty did.

Google, for example, is under significant pressure from the socialization of the web. The way that people find content and services is being altered by the popularity of social networks like Facebook and Twitter — to the point where search may no longer be the primary way that people find new services. Google is trying to take advantage of that phenomenon by building its own Google+ network, and by adding “+1” recommendation features to its search. But will this be enough? It’s entirely possible that Facebook’s social search (which is currently powered by a partnership with Microsoft) could become a significant competitor to Google.

If and when Google does wind up testifying to the Federal Trade Commission or the Department of Justice, it might even argue that Facebook is the real threat — due to its control over the social-networking market, its refusal to release data to competitors such as Google and its powerful relationships with Microsoft, Skype and other competing services. That might seem like a legal gambit, but there is a lot of truth to it as well. The web is still changing so quickly that even a seemingly unassailable monopoly like Google’s could be over before the government gets around to investigating it.

Many traditional media entities have embraced social-media services like Twitter and Facebook and blogs — at least to some extent — as tools for reporting and journalism, using them to publish and curate news reports. But newspapers in particular seem to have a hard time accepting the “social” part of these tools, at least when it comes to letting their journalists engage with readers as human beings. A case in point is the new social-media policy introduced at a major newspaper in Canada, which tells its staff not to express personal opinions — even on their personal accounts or pages — and not to engage with readers in the comments.

The policy, which I received from a source close to the Toronto Star, has a number of sensible things to say about using social media, including the fact that these tools “can be valuable sources for story ideas and contacts for journalists, and as a means of connecting directly with the communities we cover.” The paper also says that it “encourages journalists – reporters, columnists, photographers and editors – to take advantage of social media tools in their daily work.” But it warns that any comments posted using such tools “can be circulated beyond their intended audience.”

This all makes perfect sense. Social media is useful for journalism, and it does connect reporters to the communities they cover — better than just about anything else does. And yes, it is wise to be aware of the unintended consequences of even offhand remarks.

No talking about what you do

Then comes the part about being impartial and objective, and that’s when the trouble starts. The policy says that reporters and editors should “never post information on social media that could undermine your credibility with the public or damage the Star’s reputation in any way, including as an impartial source of news.” And that’s not all — the document goes on to say that:

Anything published on social media – whether on Star sites or personal platforms – cannot reveal information about content in development, newsroom issues or Star sources. Negative commentary about your colleagues or workplace will not be tolerated.

In other words, no posting about stories that are being worked on, no comments on newsroom-related topics, no talking about people who might be used or are being used as sources for Star reporting. And this prohibition doesn’t just apply to Star accounts or services under the newspaper’s name — it applies to any comments that a reporter or editor might make on their own personal accounts as well. Obviously the paper doesn’t want staffers bad-mouthing each other or talking about sensitive internal issues (something the New York Times also confronted last year), but a blanket ban on anything related to content seems unnecessarily harsh, not to mention completely unrealistic.

Never talk to your readers

It gets worse. The policy goes on to say that journalists who report for the Star “should not editorialize on the topics they cover,” because readers could could construe this as evidence that their news reporting is biased — and then tells reporters and editors that they shouldn’t respond in the online comments on stories. It says:

As well, journalists should refrain from debating issues within the Star’s online comments forum to avoid any suggestion that they may be biased in their reporting.

This last prohibition is a classic case of missing the point completely. According to the Star, apparently, comments on news stories are something that exists to allow readers to talk amongst themselves, not something that a reporter or editor should get involved in. That’s just wrong. As someone who was intimately involved in social-media strategy for another major metropolitan newspaper in Canada (full disclosure: this paper competes with the Toronto Star to some extent), one of the main features of having comments is the ability for readers to interact with writers and editors at the paper.

Treating the comments section as something that journalists shouldn’t get involved in turns it into a ghetto, and also contributes to the problems that many newspapers have with flaming and trolls and other issues — why should anyone behave properly in a comment forum if none of the staff at the paper are going to bother getting involved?

Never express an opinion on anything

The Star is far from alone in this short-sighted approach. Apart from a few staffers here and there who make use of Twitter and other social media, most major newspapers have still failed to take advantage of these tools when it comes to building relationships between their writers and readers. The biggest single factor holding them back seems to be fear — namely, a fear that they will no longer be seen as objective, something NYT executive editor Bill Keller reinforced in a recent column, in which he suggested that the paper was one of the few remaining holdouts in a world where everyone feels free to state their opinion.

Here’s a news flash for Bill, and for the rest of the newspaper world: that particular genie is already out of the bottle and has been for some time now. As journalism professor Jay Rosen has argued, the “view from nowhere” that mainstream media continues to try and defend is not only dying, but arguably does readers a disservice — since it often distorts the news in order to maintain a perfectly balanced (and unrealistic) view of events. Some journalists, like ** in a recent column in The Atlantic, have started to admit that they have personal interests and causes, but that remains rare.

The point that newspapers and other traditional media are missing is that social media is powerful precisely because it is personal. If you remove the personal aspect, all you have is a glorified news release wire or RSS feed with links to your content — and that has very little power any more. The best way to make social media work is to allow reporters and editors to be themselves, to be human, and to engage with readers through Twitter and Facebook and comments and blogs.

Is there a risk that someone might say something wrong? Of course there is. But without that human touch, there is no point in doing it at all.

Update: Toronto Star spokesman Bob Hepburn got back to me and said that the paper’s policy was “well in line with what mainstream media organizations have always done. We’ve always placed some limitations on journalists in terms of them expressing their opinions, either in the newspaper or outside of the newspaper.”

Post and thumbnail photos courtesy of Flickr user World Economic Forum

Does Facebook have a little Twitter envy? The smaller of the two social-media tools has become virtually synonymous with journalism — thanks in part to the fact that it is more of an information network than a social network, and to the example set by journalists such as the NPR’s Andy Carvin in how to use it for journalism. Now Facebook seems to be trying to reach out to the media industry by offering more resources for journalists, including a dedicated page that the giant social network launched Tuesday.

The Facebook page says that it plans to become an ongoing resource for journalists who want to figure out the best ways to use the network as part of their jobs, and will be highlighting “best practices” engaged in by a number of media outlets and reporters who use it well. The blog post announcing the launch of the page also points out that Facebook has been helping media companies become more social for the past year or so by integrating plugins and “like” buttons as well, which the social network says has produced “a greater than 300% increase in referral traffic from Facebook” on average.

Although it is a much smaller service in terms of the overall number of users (how much smaller exactly remains a matter of some debate), Twitter seems to have realized relatively early on that it is a perfect tool for journalists — both the professional kind and the amateur kind. This became fairly obvious even before the recent uprisings in Egypt and Tunisia, during news events such as the Hudson River plane landing in 2009 and the Haiti earthquake last year. And Twitter has been working to capitalize on that for some time.

The service has had a media page that shares best practices — including lessons on how to think about hashtags — for almost a year now, and has a media team that includes Chloe Sladden — who was featured on the cover of Fast Company magazine recently — and well-regarded writer and blogger Robin Sloan. Among other things, the team has talked regularly at conferences (including GigaOM’s NewTeeVee Live) and elsewhere about how Twitter can be used to amplify and extend the reach of media events such as the Academy Awards.

The one thing that Facebook has going for it over Twitter, of course, is sheer reach. Over half a billion people go to the site daily, and millions more interact with Facebook content via its open-graph plugins and “like” buttons. News sites such as The Huffington Post have made great use of this kind of integration to drive engagement and traffic, and Facebook is clearly pushing this idea as part of its latest launch. Things like hosting a live address by President Obama will probably help as well.

There are also some great examples of journalists using Facebook, including New York Times writer Nicolas Kristof, who has been posting to his page from the Middle East and elsewhere, and is perhaps one of the most engaged mainstream journalists I know of. His page has 200,000 fans, and he routinely gets hundreds of comments on the things he posts, which in some cases appear only on Facebook. NPR under Andy Carvin has also made great use of Facebook, as I described in a recent post.

Those examples aside, however, the challenge for Facebook is that while Twitter seems perfectly designed to be a real-time news and information network, many users still likely think of Facebook as a place to socialize rather than be informed — a place to play games, or look at funny pictures and videos, but not necessarily a place where journalists are active. Those things may not be mutually exclusive, but it’s going to take some work to make them feel like they belong together.

Why do people like to fool each other — or at least try to — on the first day of April? No one really knows for sure, but it’s one of the most enduring unofficial holidays of modern times, celebrated (or in some cases, barely tolerated) in dozens of countries around the world. And for whatever reason, the technology world is even more fond of this holiday than probably any other. In this post, we’ve collected some of our favorite pranks and bogus news stories from today for your amusement — if you come across any that you particularly enjoyed, feel free to add them in the comments.

But before we get started, it’s worth noting that one of the biggest April Fool’s jokes of all time might be the day itself — no one can seem to agree on how or why it became popular. One theory is that it started with the change to the Gregorian calendar in 1582, which moved New Year’s Day from the last week of March to January. Those who continued to celebrate in March (a celebration that usually lasted until April 1) were called April Fool’s. The only problem is that there are references to the idea of April and fools that pre-date the change to the Gregorian calendar.

Another theory is that it started with the Persian tradition of playing pranks on people on the 15th day of the New Year’s celebration of Norouz, which usually falls on April 1st and is known as Sizdah Bedar. This tradition apparently goes back to 536 B.C. And to make things extra confusing, plenty of countries celebrate something like April Fool’s on other days — like the 28th of December (if you want to see what April Fool was like in 1861 in the United States, check out this fascinating post from the NYT).

And now, on to the monkeyshines, drollery and shenanigans:

• Hulu Time Travel: points for effort goes to Hulu, which set up a complete homepage as the service would have appeared in the 1990s, complete with links to actual episodes of Newsradio, Kids In The Hall, 21 Jump Street and other shows — and featuring a modem-connecting noise when you click to watch. Well played, Hulu.

• Gmail Motion: the web giant says it is launching a Kinect-style interface to its email service that will let people navigate with physical gestures — the video with this one is worth watching, if only for the guy who gets to illustrate the movements (according to a blog post, Google is also changing all of its sites and services to Comic Sans, the most hated font ever invented).

• The Swiss WikiLeaks Scandal: according to a leaked cable, the Swiss government has been hiding surveillance systems in ceremonial cuckoo clocks that it has been giving to foreign diplomats for the past 30 years.

• The PlayMobil Apple Store: the gadget and gift site ThinkGeek has become a staple of April Fool’s for nerds, in part because its fake products are so perfectly believable — and this year it’s a PlayMobil replica of the Apple Store. Fake items from previous years have become so popular that the site has actually produced them as real products, included the TaunTaun Sleeping Bag and others listed here.

• ShopSavvy Becomes GreyScale: poking fun at the recent blockbuster financing — and associated controversy — by the iPhone photo-sharing app Color, this is a nice touch from ShopSavvy: the tagline for the new service GreyScale is “share photos — with no one.” But will Color think it’s funny?

• HuffPo’s Pay Wall — Just For the NYT: Some April Fool’s pranks have a kind of edge to them, and this new pay wall just for New York Times employees has that feel to it: not only is it a poke at the NYT pay plan, but a jab at the paper that has slammed Huffington for aggregating its content (bonus points to Arianna for testing the new feature in Winnipeg). The special terms of the paywall — all links from Facebook are free, provided they lead to stories about animals with extra limbs — are also hilarious.

• Sir Richard Branson Buys Pluto: the founder of Virgin Records, Virgin Airlines and about 300 other things named Virgin likes to do things large, so it’s fitting that he says he is buying Pluto and will have it reinstated as a planet.

• LinkedIn Recommends Robin Hood: the best April Fool’s jokes are ones that play on the core features of a service, and LinkedIn has done a pretty — and, unlike many other pranks, subtle — job with its “you may know” feature today, which suggests people like Albert Einstein, Werner Heisenberg (“this may be Werner Heisenberg’s profile”) and Robin Hood (“activist, chief fundraiser at Nottingham”).

(screenshot courtesy of Dan Hocking)

• Seth Godin Introduces Whitespace Ads: points for creativity should go to marketing blogger and author Seth Godin, who announced the launch of a new advertising vehicle that will use the white space in between paragraphs for links that will be highly targeted, location-based and unobtrusive — mostly because they will be invisible.

• Flattr Partners With North Korea: for true geek cred, you can’t get any better than a donation service started by one of the founders of The Pirate Bay — “brokep” describes how Flattr is going to be used by North Korea to manage the entire economy. Knowing North Korea, this isn’t really that far-fetched.

• Mozilla Launches “Do Not Fool” Standard: this one is so meta that it hurts: Mozilla has a browser header that allows you to automatically inform websites that you do not want to be fooled — a play on the “Do Not Track” header proposal for privacy protection from advertisers. Going to install this one now.

If geekish pranks are your thing, the site Hacker News is collecting them — including a new product that acts like AdBlock does in the web world, but in real life: a pair of goggles that automatically remove advertising from whatever you are looking at. And even Wikipedia has gotten into the April Fool’s Day game — but what appear to be fake articles are actually links to factual information that isn’t really what it seems, like the fact that Batman is half female.

Post and thumbnail photos courtesy of Flickr user Mykl Roventine

What is the thread that ties together the rapid rise of companies as different as Facebook, Zynga, Twitter, The Huffington Post and Quora? Wedbush Securities, a brokerage firm that analyzes the valuations of private companies, says they are all players in what it calls the “Second Internet.” Wedbush says there are certain attributes that allow such players to grow and thrive while more traditional players — including some of the leaders from the early days of the Internet — fail to prosper and gradually recede into history. The most important of these attributes, the firm says, is an understanding of the value of the social web.

The social nature of this new wave of Internet companies is such a major factor that Wedbush also calls it the rise of the “Social Internet” in a new report on the sector, and says successful companies are powered by similar features, including:

• Platforms open up their API to developers
• Continuous and rapid pace of innovation (see Facebook)
• The company/brand must listen to the dialogue and participate with customers
• Customer contribution is a large percent of the value/experience
• Every customer has a personalized experience
• Social graph connections drive discovery rather than search

The report looks at the value of Facebook — comparing the growth of the company to the growth of Google — as well as the rise of other key players such as Quora, The Huffington Post and Zynga, and how each of them effectively took over from a leader of what it calls the “First Internet.”

So by the brokerage firm’s reasoning, The Huffington Post took over from CNN, Quora took over from Yahoo Answers — which in turn took over from Encyclopedia Britannica — Zynga has taken over from MiniClip, which took the place of former leader Electronic Arts, and Jive Software has taken over (or is taking over) from Google Docs, which took over from Microsoft Office. One of the few early Internet companies that seems to have what it takes to bridge this gap is LinkedIn, the firm says (although some might argue the opposite).

As part of the report, which also looks at the rise of players such as BranchOut — the Facebook-based business network that is trying to give LinkedIn a run for its money in that market — Wedbush also looks at Facebook’s potential market value, and comes to the conclusion that the company could one day be worth as much as $200 billion. That’s up from a recent private-market valuation of about $75 billion and would put Facebook firmly in Google territory.

According to the analysis by Lou Kerner, who also does secondary-market valuations of private companies like Facebook and Twitter for the website Second Shares, the giant social network could actually have even higher profit margins than originally forecast (as high as 50 percent, it says), and could grab an even larger share of the growing market for online social advertising and marketing dollars (as high as 15 percent of the global market, Wedbush estimates).

There are some caveats worth keeping in mind when reading the report, of course. For one thing, some of the leaders that it identifies could easily be replaced by something else — Quora, for example, may well have peaked in terms of awareness and growth after a recent surge in popularity, and it’s not clear whether it can continue and become mainstream in any real sense. And when it comes to Facebook and Zynga, the firm is part of a hot private market for the shares of those companies, and so has an obvious interest in making them appear as desirable and highly valued as possible.

That said, however, reports like this one help put the spotlight where it should be: on companies that have been able to take advantage of the social nature of the web — what at one point was being called “Web 2.0” — and how that has allowed them to grow at a speed that hasn’t been seen since the early days of Google. Sometimes we are so close to these events and companies that it’s easy to lose sight of how big a transformation they have helped create in our online lives.

It also helps reinforce how difficult it is for even early Internet leaders to adapt to and take advantage of these changes, as Google is trying to do by bolting social features onto its services through moves like its recent +1 launch. Leading in one wave is no guarantee that one can lead in another — and in some cases may make that even less likely to happen.

Author and New Yorker writer Malcolm Gladwell caused some controversy last year when he said that social-media tools like Twitter aren’t worth much as a tool for social activism (or at least not “real” social activism). After the uprisings in Tunisia and Egypt — both of which involved extensive use of Twitter and Facebook by demonstrators and revolutionaries — many wondered whether Gladwell would alter this stance based on some powerful evidence to the contrary, but the author made it clear in a recent interview with CNN that he is still skeptical about how much of an effect such tools have.

In the interview (transcript here), the New Yorker writer says that Twitter and Facebook may have been used during the recent uprisings in countries like Tunisia and Egypt, but it isn’t clear that they were crucial in any way to the revolutions there. Gladwell argues that other similar events have taken place in the past — including the demonstrations in East Germany that eventually led to the collapse of the Berlin Wall — and they didn’t require any such tools:

I mean, in cases where there are no tools of communication, people still get together. So I don’t see that as being… in looking at history, I don’t see the absence of efficient tools of communication as being a limiting factor on the ability of people to socially organize.

This is the same point Gladwell made in a short note about Egypt that he posted at the New Yorker site in February, in which he wrote that “people protested and brought down governments before Facebook was invented. They did it before the Internet came along.” As more than one observer has pointed out, this isn’t much of an argument — there were political uprisings before guns and tanks came along too, but no one would deny that guns and tanks changed the nature of social revolutions considerably. Sociologist Zeynep Tufekci called arguments about how revolutions occurred before X or Y was invented “intellectually lazy.”

Gladwell also argues that social media and other such tools can just as easily be used dictators and governments to crack down on revolutions:

[Y]ou could also make the opposite argument that some of these new technologies offer dictators a – give them the potential to crackdown in ways they couldn’t crackdown before. So, my point is that for everything that looks like it’s a step forward, there’s another thing which says, well, actually, you know, there was a cost involved.

This might as well be called the Morozov principle, since it is a cornerstone of political writer Evgeny Morozov’s argument — in his book Net Delusion and in his columns at Foreign Policy magazine — that the Internet is as much of a danger to social movements as it is a benefit, because government forces can monitor Facebook to see what demonstrators are up to, and track their movements using Twitter and other social tools.

But even this argument acknowledges that social-media tools have changed the nature of social activism in significant ways. They may not be 100-percent beneficial, as Morozov alleges some “cyber-utopians” believe, but they clearly have altered the landscape — and in many cases this appears to have tipped incipient revolutions in places such as Tunisia and Egypt over into real-world uprisings, something that you might expect would interest Gladwell, the author of the much-hyped book The Tipping Point.

For whatever reason, the New Yorker author seems determined to downplay the effect that social media has in such situations, despite the evidence to the contrary.

Rumors have been circulating for some time now that Twitter co-founder Jack Dorsey might be taking on more of a role at the company, and today Dorsey confirmed he is going to head up product development at Twitter as executive chairman, while also continuing in his existing role as CEO and co-founder of mobile-payment startup Square. The move to give Dorsey more authority at the company appears to be an attempt to show that Twitter is putting more emphasis back on the product, rather than just on making money — something that the social network has been catching a lot of flak about lately. But can Dorsey help steer the company back onto the right track?

The most recent dust-up for Twitter was the response to new rules around using its API for pulling data into third-party applications. In contrast to the more open approach the company took in its early years, where developers were encouraged to create apps and services that leveraged the growing social network, the new rules seemed to clamp down on many aspects of Twitter’s ecosystem. Combined with some heavy-handed responses to Twitter app providers such as UberMedia, this struck many as showing a different — and less attractive — side of the company.

There was also some sharp criticism from users about a recent update to Twitter’s official mobile clients, which introduced a new feature called the Quick Bar (quickly dubbed the “dick bar” after CEO Dick Costolo) — one that seemed designed primarily to push the network’s new advertising-related services. Some users said they felt that Twitter was closing off avenues for alternative app suppliers at the same time as its own apps were becoming less useful.

Dorsey’s return to prominence at Twitter is a reversal of fortune in some ways for the Twitter co-founder and his former boss Evan Williams. Dorsey started Twitter in 2006 as a side project within Odeo, a media startup created by Williams after selling the Blogger platform to Google. It soon became obvious that Twitter was more interesting than what Odeo was originally doing, and Williams shifted his attention to the new service — effectively forcing Dorsey out as CEO, something Dorsey compared to “being punched in the stomach” in a recent profile for Vanity Fair.

Last year, Williams stepped down as CEO to devote more time to Twitter’s product development, and was replaced by former Feedburner chief executive Costolo. So far, there has been no mention of what Williams will be doing in light of Dorsey’s expanded role in developing the product, and sources within the industry say the former CEO is no longer actively involved in Twitter (although he did interview Lady Gaga at the Twitter offices recently).

The big question for Twitter, and for Dorsey, is whether the network can push forward with its attempts to control its ecosystem and find new sources of monetization, while still maintaining the strengths that made Twitter so appealing in the first place. That’s a tough assignment for someone who already has a full-time CEO job at a different company, and the stakes for Twitter continue to rise along with its market valuation.

Post and thumbnail photos courtesy of Flickr user Luc Legay

The Google book settlement — which the search giant signed with the Authors Guild and the Association of American Publishers in 2008, after a dispute over the company’s scanning of books — was recently struck down by a judge as too far-reaching, which is arguably true (although Google would undoubtedly disagree). But the fact that the arrangement has been rejected might not be such a bad thing, because it puts the spotlight back where it should be: on the fact that Google is doing nothing wrong, legally or morally, in scanning books without the permission of the authors or the publishers of those books.

Just to recap, Google started scanning books sometime in 2002, as part of its expressed desire to “index all of the world’s information.” In addition to deals with certain publishers and various university libraries — deals that are not affected by the book settlement or the legal ruling — Google also began sourcing and scanning books that were either in the public domain or were “orphaned” (a term used to refer to books that are still under copyright, but whose author or publisher can’t be found).

So far, so good. But Google also started scanning and indexing books that were under copyright, and then offered authors and publishers the ability to “opt out” of the program and have their books removed. Some felt that this was a good bargain — especially since Google was going to help promote their books (by revealing them in search and at the Google Books site) and give readers an easy way to buy them. Others, however, said that scanning and indexing their books without explicit permission was wrong, and filed the lawsuits in 2005 that led to the agreement.

The crux of this argument is that scanning a book makes a copy of that book, and that copying is not permitted unless a copyright holder specifically agrees. The authors and publishers made this argument despite the fact that Google only ever shows a small fraction of a text when they display a book online. It’s not as though the company planned to make copies of all books freely available to anyone through some kind of Google Books version of Napster. But the plaintiffs argued that simply scanning them was bad enough.

This is a ridiculous position, and always has been. Scanning something makes a copy of it in the same way that my viewing a web page makes a copy of it in the RAM of my computer — I’m surprised that authors and publishers haven’t tried to argue that this is secondary copyright infringement as well.

The reality is that Google’s use of selected extracts from books or any other work is protected by the principle of fair use (PDF link), which allows anyone to make use of published content of all kinds (text, images, etc.) without asking for permission from the creator or the rights holder. It’s the same principle that allows Google to index and show search results for images, web pages and other content without having to ask every single site publisher or photographer.

Why is this important? Because without that ability, search engines as we know them couldn’t exist, and they are a positive force for society as a whole — just as having a single way to search (and buy) every published book in the world would be a positive thing. Imagine if we were setting up public libraries now: would any author or publisher agree to have copies of their books just sitting there on shelves, for free, with anyone allowed to borrow them for as long as they wanted to? Unlikely (and e-book publishers like Amazon are trying to roll back borrowing abilities for digital works as well). If I want to buy a book and rip it apart and then scan it and save a copy on my hard drive, I should be free to do so, and so should Google.

The big problem with the Google book settlement, as noted by the judge who struck it down (PDF link), is that the settlement gave the web giant the exclusive right to do whatever it wished with all scanned works, including selling orphan books, which is arguably over-reaching. But that doesn’t change the fact that Google’s initial impulse was the right one: it does have the right to scan and display extracts from books, regardless of what the Authors Guild and the AAP say, and it should be allowed to continue doing so.

I didn’t get a chance to write about the launch of the New York Times subscription plan last week for a number of reasons (okay, I was on a beach) but I’ve since read most of what others have written about it, and the general consensus seems to be that it is a) confusing, and b) a sign of desperation. But while both of these things are arguably true, my big problem with the newspaper’s money grab is that it is fundamentally backward-looking. More than anything else, it feels like a defensive move to buy some time while the paper figures out what it wants to be when it grows up.

There’s no question that the details of the plan are somewhat bewildering, as Felix Salmon of Reuters has noted: occasional readers get to see 20 “items” for free in a month — with the definition of an “item” subject to the restrictions described in the newspaper’s FAQ on the topic — and then they have to sign up for a plan. Paying $15 a month gets you access to the website and the iPhone app, but (somewhat surprisingly) not the iPad app. For $20 a month you get access to the website and the iPad app, but that doesn’t get you a subscription to the iPhone app. If you want access across all platforms, you have to pay $35 a month.

Once you get past these nuances, however, it becomes fairly obvious that the pay plan has little or nothing to do with promoting the iPad app or the iPhone app, or even the newspaper’s website. Instead, it seems pretty clearly designed to protect the subscription numbers for the printed version of the Times: if you subscribe to virtually any version of the paper, including the Sunday-only option, everything digital comes along with it for nothing. In other words, you can pay as little as $30 a month and get the entire contents of the newspaper in whatever form you want.

In that sense, the Times pay plan seems to be motivated by the same impulse as other paywalls at newspapers such as the Times and the Sunday Times in Britain — where News Corp. erected subscription plans last year — and at New York Newsday, which launched one in 2009. As I pointed out in a post at the time Rupert Murdoch was planning to launch paywalls at his British papers, the main point of these walls was to keep people in, not keep people out. Since print continues to deliver the majority of revenue for newspapers such as the Times and the NYT, it’s crucial to keep readers from cancelling their print subscriptions and simply moving to read everything for free online.

Is this a compelling financial rationale for a pay wall or subscription plan? Perhaps. There’s no question that, as the New York Times admitted when it announced the new plan, newspapers need to find new sources of revenue to replace declining advertising income. But I’m skeptical that the pay plan is going to produce the $100 million or so in new revenue that some seem to think it will.

Even more than that, however, the Times’ subscription model seems fundamentally reactionary, and displays a disappointing lack of imagination. The newspaper seems to be saying: “What we do is valuable, and you have been getting it for free, so it’s time to pay up.” Some readers may accept that rationale, and sign up — but others are going to go elsewhere, or reduce their NYT consumption to links that arrive from blogs, Twitter and Facebook, which the newspaper has (wisely) decided will be exempt from the subscription wall. And so the paper will continue to use its new digital assets primarily to subsidize its declining print business.

The success of aggregators like The Huffington Post — which NYT executive editor Bill Keller recently ranted about — is only the most recent sign that the way many people consume their news has changed forever. It is no longer about picking a specific outlet like the Times, and then relying solely on that for news and opinion about the world. Traditional media like the NYT have lost the control they historically had over distribution and consumption, and attempts to reimpose the scarcity that such things once had is ultimately futile.

The exemption for Twitter and other social media is a sign that the Times understands this on some level at least, but why not go further? Why not offer people a subscription to special Twitter direct messages or Facebook Q&A sessions with writer Nick Kristof as he reports on the uprisings in the Middle East? What about offering real-world events that involve some of its most prominent voices, where people can meet them and network with each other at the same time? The music industry seems to be waking up to the fact that individual songs are simply a loss leader that drives demand for other services, but the New York Times is still trying to charge people monthly fees for undifferentiated news content.

Will the subscription plan bring in some money? No doubt. But putting meters on its existing content is not going to save the Times. In order to really take advantage of the revolution that is underway in the content business, it needs to start thinking about what it does in a whole new way, and there are few signs of that happening any time soon.

Post and thumbnail photos courtesy of Flickr user Mark Strozier

Birthdays are a natural time for reflection, even if you’re only five years old, which is the age that Twitter officially turned today. It may not seem like much, but that’s about 35 in Internet years, which means the company is close to being middle-aged — and Twitter has definitely been struggling with some mid-life challenges lately. Another much-hyped web startup also just had a birthday recently: Digg, which turned six in December, has been struggling as well, after a failed redesign and the departure of founder Kevin Rose. And Digg’s decline from pioneering service to also-ran contains some lessons for its fellow social-media service.

In some ways, it’s hard to believe that Twitter has been around for five years. The service that Jack Dorsey and Biz Stone originally launched as a side project within Evan Williams’ company Odeo — which was later shut down, with Williams taking over from Dorsey as CEO of Twitter, in a move that reportedly caused some bad blood — didn’t seem like much when it first launched, even to Om. Like most users, I thought the service was fairly useless when I joined in early 2007, and I spent months wondering what I was supposed to do with it before a critical mass of friends and other interesting people joined, and it began to come to life.

Twitter’s status as a powerful real-time news platform didn’t really become clear until it was used to transmit updates about the forest fires in California in 2007 and during an earthquake in China in 2008. Gradually, people started to see it as something other than just a way of talking about what you were having for lunch — and when Janis Krums used Twitter to post a picture of a plane crash-landing in the Hudson River in 2009, the reality of Twitter as a news-publishing system started to go mainstream. Every subsequent event, from terrorist attacks in Jakarta to the earthquake in Haiti, has reinforced the idea that the service lowers the barriers to entry for publishing, as Evan Williams put it last year.

The most recent example was the use of Twitter and Facebook by dissidents in Tunisia and Egypt to co-ordinate demonstrations and uprisings against their governments, and the compelling stream of news from participants that was carried out of Tahrir Square by Twitter to the world, thanks in part to real-time news aggregators like Andy Carvin of National Public Radio, who created what was effectively a one-man wire service.

More than anything else, however, Twitter has become a platform for community — whether it’s a community of people interested in revolutions in the Middle East, or a community that is obsessed with the latest product release from Apple, or a community that wants to know what John Cusack or Steve Martin think about current events. And one of the hallmarks of a social service like Twitter and Facebook is that the more people use it to connect with each other around things they are passionate about, the more they feel like they own it to some extent — and that feeling is what Twitter is currently fighting as it tries to mature as a company.

You can see that in the outraged responses to the recent Quick Bar fiasco, and to the shutting down of third-party clients like Bill Gross’s UberMedia — which has been trying to develop its own competing monetization strategy for the social network — and to the rollout of services such as Promoted Tweets and Promoted Trends. As I’ve argued before, users have grown so used to seeing Twitter as a utility that every move the company makes to add money-making layers or to control its ecosystem is seen as an affront in some sense, like someone invited you to a party at their house and now is asking you for money or putting up turnstiles and imposing all kinds of rules on your behavior.

Although the two services are different in many ways, Digg has also been struggling with the same kinds of issues — and some of those struggles are directly related to Twitter, since Digg’s link-sharing features, which were once a pioneering example of what some called Web 2.0, have arguably been overshadowed by the growth of Twitter. But Digg has also rolled out its own poorly-received design features: the service launched Digg v4 last August and the new design was roundly criticized as unstable and (more importantly) a breach of faith with the traditional Digg community. The site’s traffic plummeted, the new CEO rolled back most of the new features and laid off almost 40 percent of the staff, and founder Kevin Rose is moving on to start a new venture.

So what are the lessons that Digg has to teach Twitter? One is that even pioneering services, whose founders appear on the covers of leading business magazines, can be overtaken by events, and by other services that don’t even exist yet. Yes, it’s true that Twitter is supposedly worth $10 billion, and is much larger than Digg ever was — but that lesson still applies (as MySpace is well aware). And the other lesson is that the core of a social network is the community of users, and arguably in Twitter’s case the community of developers as well, or the “ecosystem.”

Alienating either or both of those groups is a very risky strategy, as Digg has discovered. It could pay off in Twitter’s case, but it could also ruin one of the key features that make the network so powerful and compelling, and that is something that would be very difficult — if not impossible — to recapture.

Post and thumbnail photos courtesy of Flickr user Will Clayton

In another shot fired across the bow of the Twitter ecosystem — or another volley in the ongoing Twitter wars of 2011 — the company has come out with new terms on which all developers must operate, which makes it clear that Twitter plans to own the majority of the value in the system, and relegate third-party apps to the periphery. As with the company’s other recent moves, including shutting down misbehaving apps, the response has not been friendly from many parts of the network. And while Twitter can probably get away with this kind of behavior, it is taking a real risk of losing much of the goodwill it has built up over the years.

Critics have accused the company of “nuking” the developers and services that helped it achieve its early growth in its drive to monetize its network, in much the same way that Hunch founder and angel investor Chris Dixon criticized the company last year for “acting like a drunk guy with an Uzi” after it acquired Tweetie. Some have given the company credit for at least laying out the rules in a clear manner with its latest API update, since much of the developer community has been unclear on what was permitted and what wasn’t, but those responses seem to be in the minority.

The point has become clear by now: anyone who is still under the impression that Twitter is the friendly, touchy-feely company that co-founder Evan Williams used to run — the one that admitted it “screwed up” relations with developers by moving too quickly — is living in a dream world. Twitter CEO Dick Costolo may have been a standup comedian at one point, but he is a businessman now, and Twitter is determined to do whatever it takes to come up with a business model to justify the huge valuations it is getting.

As MG Siegler has pointed out, what Twitter is doing is just business and not personal — but there is a reason that most businesses don’t operate the way the Mob does (other than the fact that killing people is illegal, of course). Acting that way, by routinely kneecapping people or setting their businesses on fire, is a risky proposition. Even if you *can* do it, it’s not clear that you *should* do it, especially if some of your business depends on goodwill (as opposed to fear), as Twitter’s clearly does, and especially if a large part of your success is due to that larger ecosystem.

Without the help of third-party apps like Tweetie and Tweetdeck, the company likely would not have been nearly as successful at building the network (and a ready-made client like Tweetie certainly wouldn’t have been sitting there waiting to be acquired). But the ecosystem didn’t just build demand for the network — it also helped build and distribute the behavior that now makes Twitter so valuable: the @ mentions, the direct messages, re-Tweets and so on, none of which were Twitter’s idea originally. That created a huge amount of goodwill, and led to the (apparently mistaken) idea of an ecosystem.

It’s all very well for Twitter to claim ownership of all those things now, since it is their platform. And obviously there are businesses that can get away with being arbitrary or dictatorial — Apple is well known for such behavior, after all, and it is one of the most valuable companies on the planet. But this only works over the longer term if your product is so unique and compelling that people will put up with it. Is Twitter in that category? Perhaps. The company managed to grow at an astronomical rate even when it was suffering repeated outages, because users (including me) were so addicted to it. That may have made Twitter a little cocky about how necessary it is.

It’s also true that there isn’t really much competition when it comes to micro-blogging, or whatever we choose to call Twitter. Open-source options such as Status.net have tried to get traction, and programmer Dave Winer has been lobbying for and trying to jump-start an open Twitter alternative for some time — even before the company made it obvious that it was planning to “prune” the ecosystem. So far nothing has come along that can compete, but Twitter’s behavior could serve to boost those efforts substantially. And there would be definite benefits to an open system — not just in terms of features, but for when governments decide to order companies like Twitter to release user information to the State Department about their espionage investigations.

In the short term, Twitter seems likely to get away with throwing its weight around and dictating the terms on which developers — and users, to a large extent — can access or make use of the network. And maybe the network has grown to the point where none of that matters any more. But sometimes when you bulldoze an ecosystem, what you wind up with is a lot of weeds and a corporate mono-culture in which growth no longer flourishes, and in some cases that growth subsequently moves elsewhere. That’s a risk Twitter seems willing to take — whether it is the right one remains to be seen.

If you’re a traditional journalist, or someone who works for a traditional media outlet, the easiest way to cast aspersions at a web-based or digital media company is to use the A word: that is, “aggregation.” New York Times executive editor Bill Keller stayed true to form in a piece he wrote for his newspaper Thursday, in which he categorized The Huffington Post and other unnamed online media outlets as pirates, who are in the business of “counterfeiting” content rather than engaging in “real” journalism. In only a few paragraphs, the NYT editor managed to say volumes about how little he understands where media is now, or where it is going.

Keller’s piece starts out as a humble discussion of his status as the 50th most powerful person in the world (according to Forbes magazine) and how he thinks this is absurd, since he just runs a newspaper. But it quickly becomes a complaint about how members of the media — and assorted “flocks of media oxpeckers who ride the backs of pachyderms, feeding on ticks,” as well as professional pundits such as Clay Shirky and Jay Rosen — spend too much time talking about media in the abstract instead of doing it.

Then he launches into an attack on aggregators, saying the media industry has “bestowed our highest honor — market valuation — not on those who labor over the making of original journalism but on aggregation,” an obvious reference to the $315-million acquisition of the Huffington Post by AOL.

And what does the term aggregation mean? That seems to depend on who does it. The NYT editor says that aggregation can mean “smart people sharing their reading lists, plugging one another into the bounty of the information universe,” and then he admits that this “kind of describes what I do as an editor.” So aggregation is journalism then? But wait — Keller goes on to say that aggregation often amounts to:

[T]aking words written by other people, packaging them on your own Web site and harvesting revenue that might otherwise be directed to the originators of the material. In Somalia this would be called piracy. In the mediasphere, it is a respected business model.

This is where he calls out the Huffington Post, whose founder is “the queen of aggregation,” having discovered that “if you take celebrity gossip, adorable kitten videos, posts from unpaid bloggers and news reports from other publications, array them on your Web site and add a left-wing soundtrack, millions of people will come.” The NYT editor goes on to say that while AOL called the acquisition of Huffington Post a key part of its content strategy, buying an aggregator and calling it a content play is “like a company announcing plans to improve its cash position by hiring a counterfeiter.” (Update: Arianna Huffington has posted a response to Keller’s piece at her site).

Keller seems to be missing the point that all media — both online and offline — is to some extent about aggregation. Even newspapers like the New York Times aggregate content from newswires and occasionally rewrite that content to make it their own. Yes, they pay those newswires for the privilege, and so does the Huffington Post: the difference is that it pays in attention, which it directs back to the original source, just as Google pays with links when it aggregates content at Google News. According to a Huffington Post staffer, news websites actually beg the site to aggregate their content, since it gets more traffic.

Aggregation is a term that covers a wide variety of behavior, some of it nefarious and much of it not. To take just one example, look at what Andy Carvin of National Public Radio has been doing by pulling in and republishing Twitter posts from hundreds of different people — both individuals and journalists, including New York Times writer Nick Kristof — as a way of covering the revolutions in Tunisia and Egypt.

Is that aggregation? Sure it is (or “curation,” as some prefer to call it). Is Carvin not taking reports from unpaid bloggers and news reports from other publications and republishing them? Of course he is. But he’s also engaged in a very real form of 21st-century journalism. And maybe if Bill Keller spent a little more time trying to understand how aggregation works instead of railing against it, the New York Times would be a little further ahead in this new media game, instead of playing catch-up with Arianna Huffington.

Ever since the web first started to become mainstream, there have been attempts to build the “Daily Me,” a personalized newspaper that learns what you like or are interested in (does anyone remember PointCast?). But as I noted in a recent post on the topic, many of these efforts are lackluster at best, and irritating at worst. They either require too much fiddling to tune them, or they don’t show any intelligence at all (or both). But that doesn’t stop companies from trying — and the most promising entrants in this race so far are those that try to build their recommendations on top of the social signals coming from Twitter and other networks.

The latest to join the field is a personalized magazine app for the iPad called Zite, whose name is a play on the German word “zeitgeist,” meaning “the spirit of the times.” The company behind the app is based in British Columbia, and has been funded by angel investors and research grants from the Canadian government, and CEO Ali Davar says Zite has been working on its recommendation engine for several years. An earlier version of the project, which is based on technology developed at the University of British Columbia’s Laboratory for Computational Intelligence, involved a browser extension called Worio that suggested related results when users did a Google search.

The Zite app pulls in your Twitter account and your Google Reader feeds (if you have them), and then suggests topics based on your interests. This was the first place where it fell down for me — it said that it didn’t have enough information about me, which I thought was odd, since I have been on Twitter for about four years, have posted more than 35,000 tweets and follow over 2,000 people. I’ve used Google Reader for years as well, and am subscribed to about 600 feeds. Although Zite got some of its suggestions right, it recommended Barcelona as a topic, which was totally out of left field — in fact, I can’t recall ever mentioning the Spanish town before.

Although Robert Scoble says that Zite doesn’t feel as slick as Flipboard, I thought the app worked quite well in terms of usability — you can swipe to move through articles, click to read them in a built-in browser, and share them easily (although you can’t save them to Instapaper, which is a shame). And you get asked with each one whether you like the content or want to see more of it, which is something that other apps and services such as Flipboard are missing. It requires some effort on a reader’s part to do this training, and many will probably not do it, but it is crucial for learning likes and dislikes.

One glaring omission from Zite is the lack of Facebook integration. Davar says that Facebook tends to provide sources that are too heterogeneous (that is, too diverse) to be a source of good recommendation data, and that might be true, but it’s still a giant social network and a huge part of many people’s online news consumption, so it seems odd to leave it out — especially when the data coming from the billions of “like” buttons scattered around the web could be a source of so much data on what people want to read (Yahoo Labs has just released an interesting survey of what that shows for some of the major news sites).

There’s one nagging question that keeps jumping out at me as I look at all of these apps and services, however, and that is: where is Google? The combination of smart aggregation and algorithm-driven personalization seems like something the search engine should be all over. Google News has added some personalization aspects, but they are anemic at best, and one of the original customized news-readers — Google Reader — hasn’t really capitalized on that opportunity much at all, although it does provide some recommendations.

The reality is that the RSS reader has been eclipsed (for the small proportion of the population who even used one) by Twitter and Facebook and other social news sources, or smart aggregators such as Techmeme and Mediagazer. Google has more or less failed to take advantage of that transition at all when it comes to news reading, although it is trying to add social signals to search. Why not take FastFlip and try to make it a Flipboard or Zite or News360 competitor?

And apart from the Washington Post’s new Trove project and the News.me spinoff from the New York Times that Betaworks is close to launching, newspapers — who should know a thing or two about filtering and recommending the news to people — are virtually nowhere in this game.

If there’s one thing that web users need more than ever, it’s smart filters to help them navigate the vast tsunami of information that comes at them every day (it’s not information overload, says Clay Shirky, it’s “filter failure”). Someone is going to solve that problem, and if they do it properly they could capture a significant share of the online news-reading market.