Month: May 2008

Like Hank Williams (no, not *that* Hank Williams) I too am fascinated by all of the recent talk in the blogosphere about how Twitter needs to be decentralized and/or disintermediated for the good of the Twitter-verse. In a post written for his own blog (creatively titled “Why Does Everything Suck?”) and cross-posted at Silicon Alley Insider, the New York-based entrepreneur says that if some of the critics of the company have their way, Twitter could find itself effectively disemboweled before it has had a chance to even become a business:

“It is entirely possible that before Twitter makes its first penny, it will become too important to exist in its current form, and the community will feel it has to be replaced by an open source, distributed framework. This should strike fear into the hearts of anyone who decides open their API.”

Why do people want to disintermediate Twitter? Dave Winer says it’s because he doesn’t like the idea of that stream of content disappearing somehow when the service is down (or when Twitter goes under), and compares the service to the Web pages that were created during the early days of the Web. Marc Canter, another cantankerous early Web guy, says Twitter needs to be decentralized and standardized because it’s as important as the DNS system behind the Internet.

Now I’m as big a fan of Twitter as the next guy — and maybe more so. But is this social network for the attention-deficit crowd, which 90 per cent of the world has never heard of, really as important as the DNS system, and so important that it can’t be left in the hands of one company? I think that’s more than a leap of logic — it’s like a double-backflip half-gainer of logic. It has to be flattering that people see Twitter as so crucial that it needs that kind of protection, but it still seems kind of… well, loopy.

It’s not that I’m not in favour of distributed apps, because I am. And if there’s a way to create a system that Twitter also plugs into, then that might be not a bad way to proceed — because as Steve O’Hear notes, anything that comes next has to respect what came before. Fred Stutzman says he doesn’t think it will work. Cindy Aleo-Carreira at Profy says that the disintermediation move is one of the downsides of the “build it and then figure out a business later” model. I think she has a point. I’d love to hear what Ev Williams thinks.

Not long after Radiohead offered their new album In Rainbows through their website for whatever fans wanted to pay, Nine Inch Nails’ frontman Trent Reznor took a similar approach with a new album he produced by hip-hop artist Saul Williams. The response was relatively lacklustre, however, with less than 20 per cent of those who downloaded the tracks paying even $5 for them, and from some of the interviews he gave about the experiment, it sounded as though Reznor wasn’t all that happy with the way things turned out.

The singer/songwriter hasn’t pulled back from experimenting with Web releases, however — in fact, just the opposite. In March, he released a new instrumental album called Ghosts I-IV as a combination download and physical product; fans could opt for a series of offerings, all the way from mp3 tracks at $5 to a deluxe package for $300, which included signed cover art. Even though nine of the tracks were released for free through the BitTorrent network, more than 2,500 bought the deluxe version and Reznor said he made $1.6-million.

In gratitude, the NIN frontman has released his latest album, In Slip, as a free download. A message on the download site says “As a thank you to our fans for your continued support, we are giving away the new Nine Inch Nails album one hundred percent free.” The album can also be streamed through iLike (something R.E.M. also did with their latest album). Radiohead, meanwhile, said recently that the “pay what you want” release of In Rainbows — which Reznor criticized as “insincere” and a “bait-and-switch tactic” — was “a one-off” and won’t be repeated.

Update:

My friend David Usher, a musician who writes a blog about social media at CloudID, says Radiohead and Trent Reznor have the resources to do whatever they want with their music, but that doesn’t really help up and coming artists find a new business model.

There’s a fascinating piece in the New York Times looking at IDG — the world’s largest publisher of tech-related magazines — and how it has been transformed from a print entity into what has increasingly become an online-only entity:

“In 2002, 86 percent of the revenue from I.D.G.’s publications came from print and 14 percent online. These days, 52 percent of the revenue is from online ads, while 48 percent is from the print side.”

That’s a remarkable shift. In some cases, magazines continue to be printed but come together primarily online, and in other cases — such as InfoWorld — the print magazine has been closed completely and the publication is solely online. And the business is better:

“Today, I.D.G. says, the InfoWorld Web site is generating ad revenue of $1.6 million a month with operating profit margins of 37 percent. A year earlier, when it had both print and online versions, InfoWorld had a slight operating loss on monthly revenue of $1.5 million.”

There is a dark lining to the silver cloud, however — the story says that IDG’s staff levels are 50-per-cent below where they were when the transformation started:

“By then, the editorial staff was down to its current level of 17 people, about half the number in 2002, and way below the peak of nearly 100 during the technology spending boom of the late 1990s.”

Still, a fascinating tale of one publisher that took the bull by the horns and made the change deliberately. As former editor Stewart Alsop says near the end of the piece: “What’s happening at I.D.G. is a fairly accurate map for every other publishing organization. Get over it, it’s going to happen.”

In the wake of the Microsoft-Yahoo merger collapse, there has been a lot of commentary about how Steve Ballmer’s job as CEO of Microbeast is in danger because the deal didn’t go through. Erick Schonfeld has a post up at TechCrunch that quotes an anonymous source at the software behemoth as saying Ballmer is uneasy — hint: he’s yelling even more now! — and the board is considering pitching him overboard. I’m going to side with my friend Kara Swisher on this one; I think much of that is probably wishful thinking by Microsoft insiders. I don’t think Ballmer is going anywhere — or at least not because of this.

So why did I say that Jerry Yang should be fired? Completely different story, IMO. Microsoft made a gamble that it could bag Yahoo, and that there would be enough synergies to justify the deal (adding Yahoo’s media properties, the ad-keyword business, etc.). You can debate whether that’s true or not, but in my opinion it was a fair bet to make. And when it looked like it was going to get too expensive or go needlessly hostile, Ballmer walked. No harm, no foul. Not to mention, of course, that this still isn’t over yet. The fat lady is just warming up.

Yang, on the other hand — either on his own, or aided and abetted by the Yahoo board — waffled and whiffed and came up with lame proposals for boosting the company’s value, and never produced anything that justified either a much higher share value or a dismissal of the Microsoft deal in favour of something better. There is nothing better, and Yang knows it — and most Yahoo shareholders likely know it too. That’s why he deserves to leave, and Ballmer deserves to stay.

So Microsoft has taken its ball and gone home: the company announced late today that it is withdrawing its bid for Yahoo after the company refused its bumped-up $33 a share offer and stuck firm to its demand for $37 a share. The letter from Steve Ballmer, which my friend Paul Kedrosky also has posted, describes how Yahoo not only refused the offer, but made it obvious that it was prepared to effectively commit corporate hari-kiri in order to make itself as unappealing as possible. Among other things, it planned to sign a keyword-ad deal with Google.

I’m all for fiduciary duty, and in particular the duty of senior executives to scour the globe for a competing offer in order to get the best value for their shares. But Yahoo has had three months and has turned up nothing but an unbelievably lame deal with AOL (or so rumour has it). What possible reason could it have for pushing Microsoft to $37? The existing offer was already 70 per cent higher than the stock was trading at prior to the bid. And the Google deal is just a poison pill by another name.

In my view, Yahoo CEO Jerry Yang has gone way beyond fiduciary duty and has been effectively blocking this deal in any way possible. I expect to see the stock tank, and deservedly so. If I were a shareholder, I would be calling for Yang’s head. This deal was by far the best opportunity the company had to achieve some value.

Update:

This post appears at Seeking Alpha as well, and there are some good comments from Yahoo shareholders and supporters there.

Update 2 (05/05/08):

According to an email that Nik Cubrilovic sent Richard MacManus at Read/Write Web, Omnidrive isn’t dead yet — he claims a domain change is in the works, and that a new version of the app is on the way that will use Amazon and Google for storage.

Update:

Clay Cook, an early angel investor in Omnidrive, has posted an open letter to founder Nik Cubrilovic in which he describes some of what happened after he invested $100,000. According to an email exchange with Nik that he has also posted, as recently as February the Omnidrive founder said the company was in the process of being sold and that his investment would be doubled in value.

Was Omnidrive simply too big a swing, as Ben Barren argues? Perhaps. There’s no question that the remote storage game was a pretty crowded space even when the company started, with a number of established providers like Mozy, Carbonite and others — and then along came Amazon’s S3, which reduced the cost of such services by an order of magnitude, and Windows Live Drive not long afterward. At some point, Omnidrive obviously became uneconomic. Maybe some day Nik will emerge to tell the full story of what happened to the company.

Original post:

According to Josh Catone over at Read/Write Web, the “cloud storage” company formerly known as Omnidrive is no more. The domain now goes to a hosting provider’s standard “parked page” message, and users who have commented at RWW say they have been getting error messages for months when trying to access their accounts on the system. The first signs of trouble started showing up about six months ago, when RWW reported that the CTO had left the company.

At the time, CEO and founder Nik Cubrilovic responded that everything was fine at Omnidrive, and that the company was not only profitable but had gotten a new round of financing. The departed CTO told a different story, however — alleging that he was hired to build out a team and told there was financing, but never saw any money, and that he and the entire engineering team quit because they hadn’t been paid. The whole thing had an uncomfortable similarity to the Blognation debacle, involving Sam Sethi and some non-existent financing.

Don’t ask me why, but I like to read Kanye West’s blog. I don’t really like his music all that much (note to Kanye: please don’t hate me) but his blog is hilarious — a totally idiosyncratic mix of thoughts about pretty much anything, from high-tech gadgets and cars to clothing and architecture. I don’t know how much of what he calls KanyeUniverseCity.com is actually produced by him, but the overall effect is a little like Boing Boing, but with a crazy hip-hop mogul running the show.

We all know that Kanye can get a little… well, hot under the collar sometimes. But he totally lost it in one recent post, after an Entertainment Weekly reviewer gave the opening show of his new Glow in the Dark tour a B+. Now, you might think that a B+ is pretty good. It’s almost an A, right? Well that, my friends, is why you are not Kanye West. Here’s what Kanye had to say (I’ve cleaned it up a little):

“Ya’ll rated my album sh***y and now ya’ll come to the show and give it a B+. What’s a B+ mean? I’m an extremist. It’s either pass or fail! A+ or F-! You know what, f*** you and the whole f***ing staff!!!

You don’t know sh** about passion and art. You’ll never gain credibility at this rate. You’re f***ing trash! I make art. You can’t rate this. I’m a real person. I’m not a pop star. I don’t care about anything but making great art. Never come 2 one of my shows ever again.”

Never let it be said that Kanye doesn’t wear his heart on his sleeve. After all, he isn’t a pop star — he’s a real person! And he doesn’t care about anything but making great art. And in the RSS feed version of the above post, he had an additional thought for the Entertainment Weekly writer that I guess he decided to leave out of the final version: “Chris Willman, kill yourself!” the pop star said. Now that’s great art.

With all due respect to my friend Kara Swisher over at All Things D, the news that Facebook apps are mostly designed for fun and games isn’t (I would respectfully submit) going to set the world on fire by any means. I think it’s great that Nathan from Flowing Data produced the chart that he did, and it looks really sharp and everything, but I don’t think it tells us a whole lot. Is it really a surprise that the vast majority of Facebook’s 23,000 applications are designed to be time-wasters or (at most) goofy brain-teasers like Super Pokes and Zombies and whatnot?

I know that this is supposed to show that Facebook is primarily a giant playground for overgrown toddlers, and therefore either a) a big joke, and/or b) not a real business, and/or c) not worth anything even close to $15-billion. I mean, let’s get serious — is anyone going to argue that a real business could be based on playing games, or that such a business could be worth billions of dollars? After all, nothing like that has ever happened before, right? It’s just not possible.

Just because most of the apps are aimed at fun doesn’t mean the platform itself doesn’t have value — potentially lots of value (although maybe not $15-billion). And don’t marketers and businesses use fun in various forms to sell things? I’m pretty sure they do.

Although Craigslist originally said that it couldn’t respond to the allegations made in eBay’s lawsuit against the company, it seems that Craig and/or Jim couldn’t help themselves: the Craigslist blog has a post up entitled “Kettles and Pots” which notes that many of the things eBay is accusing Craigslist of doing are things that eBay has either also done with its own shares, or has previously argued should be done with Craigslist shares. For example, the Craigslist blog argues that eBay has:

• Set up a “shareholder rights agreement” or poison pill.
• Tried to get a “right of first refusal” on Craigslist shares.
• Implemented an indemnification agreement for eBay officers.
• Set up staggered board elections.

Of course, as at least one commenter on the post has noted, eBay is a large public company with freely-tradeable shares and a broad public ownership. Craigslist is the opposite: a private company with only two major shareholders and a board consisting of… wait for it… those same two major shareholders. Even if the things it implemented were identical in every way, those facts would be enough to change the picture, since there are protections for minority shareholders even in private companies. I think Craig and Jim are going to have to do better than that. For more thoughts on the eBay lawsuit, read my previous post.

I know I’m kind of late with this one — a day or two being almost an eternity in the blogosphere — but I wanted to take note of the recent decision by a U.S. District Court judge in one of the RIAA’s high-profile copyright cases. the Atlantic v. Howell case involves a husband and wife and about 4,000 music files. The RIAA’s argument last year — an argument that was initially accepted by the court — was that even though the agency couldn’t prove anyone actually downloaded copies of the music from the Howell’s PC (other than a company working for the RIAA), the simple fact that their files were kept in a “shared” folder available to the Kazaa P2P software was enough to breach the law.

That decision was struck down this week, however: Judge Wake of the District Court of Arizona ruled that while section 106 (3) of the U.S. Copyright Act gives the owner of copyrighted works the exclusive right to “distribute copies” of those works, the law doesn’t define the term “distribute,” and so the courts have had to do so. The general rule, Judge Wake said in his decision, was that “infringement of [the distribution right] requires an actual dissemination of either copies or phonorecords.” The decision (PDF link) goes on to quote copyright experts William Patry (“without actual distribution of copies of the [work], there is no violation of the distribution right”) and William Goldstein (“an actual transfer must take place; a mere offer for sale will not infringe the right”).

The court also rejected the RIAA’s motion on another point: the agency argued that the Howells were guilty of primary copyright infringement for sharing the music through Kazaa — but the court decision said that even if someone had downloaded a copy of the music from them, because of the way that a peer-to-peer network functions, that would still only be a case of secondary copyright infringement, since the downloader would not be taking the Howells’ file, but merely making a copy of their copy.

The decision ends with this statement: “The court is not unsympathetic to the difficulty that Internet file-sharing systems pose to owners of registered copyrights. Even so, it is not the position of this court to respond to new technological innovations by expanding the protections received by copyright holders beyond those found in the Copyright Act.” The decision doesn’t mean the Howell case is over, however — it now proceeds to a regular trial. The RIAA had been pushing for what’s called “summary judgment,” which is a much faster process.

The U.S. decision is very similar to one that Canadian judge Konrad von Finckenstein (now the head of the CRTC, the federal broadcast regulator) delivered in 2004 when he was a judge with the Federal Court, in a case involving the CRIA’s attempt to get the names of file-sharers in Canada. In addition to accepting an earlier Copyright Board opinion that downloading was effectively permitted by Canada’s “private copying levy,” the judge ruled that simply putting files in a shared folder did not constitute evidence of infringement.