Posted: March 5th, 2014 | Author: irv | Filed under: Companies, Facebook, Google | Tags: ads, facebook, Google, marketing, network, social | No Comments »
While the current group of social networks are extremely popular and appear wildly unassailable, it is my assertion that they are eminently fallable. Over the past year, it has become obvious that they are having difficulty attracting users. Facebook needs to grow by purchasing smaller companies for ever increasing amounts of money. Google can’t really build a critical mass of users around it’s offering even though it is technically excellent. Even with Twitter, the most non-social of the social networks, there is trouble attracting new users while implementing features to increase their revenue streams.
Arguably, one could claim that as everyone joins the network, there aren’t additional people to add, this is the theory of saturation. While Facebook tries to assert that their daily active users is huge, and people are spending more time than ever logged in to facebook, how many of those actives are just people checking their messages? Or have facebook set up on their mobile and are technically logged in all day. This is a fantasy, people aren’t really using these services as much as they would have you believe.
Originally the promise of social networking was that people who we knew, and even more compelling, people that we don’t really know would create excellent and relevant content, thereby attracting even more people who would create great content. This would create the virtuous cycle of content creation and given the user growth would make the platform lucrative in it’s advertising reach. This is all known, what I believe everyone is currently ignoring in bubble, unicorn herd fashion, is that the cycle has been severely weakened, and their revenue models are broken.
What is ironic is that it has been weakened by the very thing that has made such scale on the internet viable: The desire of advertisers to pay for access to the social users.
It is a scenario that plays out in every market everywhere. Initially someone produces something of value, and the market forms around that. As the product evolves, the producer can easily see what works, as far as encouraging margin and price growth, and what doesn’t work, what causes price and margin decrease.
Most recently we have seen this occur in the PC market. We are now to the point where vendors are completely optimizing on a single dimension, price. Computer buyers ( obviously except those who purchase macs ) have spoken with their dollars, and their dollars want the best value for money. Hence, netbooks, and $300 laptops loaded to the gills with shizware. While it is shocking that people will accept this, this is what the consumer has chosen.
The social space works the same way. The users of the social product, gmail, facebook, google search, etc… are the product, and the advertisers are the customer. At first, users were drawn to the utility and functionality of the services. In Facebook’s case, interestingly, the initial value proposition was that one could have a private relationship out of the view of the internet with their friends. There was originally no danger that their content would appear to anyone for whom they had decided it shouldn’t.
As time has continued and these services have attained what they believe is a critical mass of users, the impetus for them to improve the service and protect their users’ privacy or to provide real value to the users diminished. The incremental income for each new user was less than could be made by increasing the amount that the advertisers were willing to pay. This has been accomplished either increasing, or inventing new areas in which to deliver ads, I.E. the facebook feed, paper, etc… In effect allowing the service to sell more inventory and spam their internal user base. Or taking content that was originally private, but could be used to deliver ads, and making it public. I won’t even start on the morality of the latter, but they have no choice, a free product at internet scale can not serve two masters, but it has to.
As anecdotal evidence, try to remember the last time you saw something interesting in the facebook feed, something that really grabbed you in a meaningful way. If you are like me, you can’t really ever remember anything really valuable that you’ve seen in the feed.
In actuality, the feed is built, designed, and optimized to deliver ads, not to deliver content of the highest quality to it’s users. In fact, the deeper the quality content is buried, the more ads you have to wade through to find it, thereby increasing the services’ revenue.
What all of this has resulted in, is a number of once useful services, that have thoroughly optimized themselves to deliver ads, and have intrinsically lost their original value to the users. This is what killed myspace, friendster, etc… This will ultimately kill Google ( albeit more slowly ), Facebook, and probably ultimately Twitter.
The reason the current model of social networks is untenable is that they are all designed around ads. None of them, at least the “big successful” ones are designed around users paying, and optimizing around value for the paying user. This will cause the end of the great social free ad-subsidized internet bubble at some point.
The reason I suggest that it will kill Google more slowly, if at all, is that Google obviously realizes that it’s current revenue model is untenable. They are aggressively seeking out real value for money products to which they can transition when the ad revenue model dries up and the users flee their free online services. People are just bored with these sites, there is nothing on them.
The same thing has happened to television. The reason people are “cord cutting” is because bundling is designed to deliver advertising, not value to the TV services’ customers. People aren’t stupid forever, eventually they realize they are being hornswaggled, basically paying twice. Once in their monthly bill, the second time with their time. It is just a matter of when.
Posted: September 6th, 2012 | Author: irv | Filed under: Amazon, Apple, Companies, Facebook, Google | 1 Comment »
Pop-Up Advertising ( Wikipedia )
Facebook’s stock price has been dropping like a rock. Most pundits exclaim that the reason is because there is no “mobile strategy.” Some attribute it to the weakness of the virtual goods market. Rarely does someone come out and say that it is because by-and-large banner and link advertising doesn’t really work on the internet.
Facebook and Google both make their living off of display advertising. Adam Curry had some insightful comments on TWiT the other day and I think he was pretty much dead-on. There are, however a few points which I don’t think the show really got to cover.
Display advertising doesn’t work. Let’s get that out of the way. Earning money by trying to get people to click on banner, or link advertising will never work over the long haul. The only case in which those ads create any sort of value is in brand recognition. The only companies which are interested in brand recognition are the ones whose revenues are upwards of 20 million. In other words, not most of the companies which are interested in advertising. Definitely not the local companies like the cleaners or the barber shop.
For the majority of businesses, which are not VC rich internet businesses, or multi-billion dollar conglomerates, sponsoring a school basketball team is a better way to spend advertising dollars than ads on Google, Facebook, or anywhere else on the internet.
What Adam Curry said about supply and demand was true, but he missed one aspect. The reason that the advertising on The Verge works for them ( for now ) is that the brands advertising on the site just want to be associated with cool and hip, which is The Verge. It is more aspiration on the part of the advertiser than real value for value.
Cost-Per-Impression ( CPM ); or the original billing metric for display advertising was based on how many times a given ad was displayed, later revised to be whenever an actual person, not a bot, saw the ad. Relatively quickly, after things settled with the innovation that Google brought to the marketplace, advertisers realized that an impression was truly worth near zero, and clicks were the thing. Google then changed to Cost-Per-Click ( CPC ) as the billing metric and things got marginally better. The problem now is that clicks can’t really be trusted for a myriad of reasons. The primary reason is gaming and fraud. One can pay huge numbers of people peanuts in western currencies to click on a given ad. No matter how clever the algorithms get, they were still designed by people and other people will be able to figure out how they work. Until algorithms in a completely unrelated area can be devised entirely by machines can they be truly opaque to humans. Even then, there is still the chance that they can be reverse engineered since they would have to be governed by logic.
Let’s get back to Facebook and Google and why Facebook’s stock is in the toilet. Assuming that impressions are worth near zero and clicks are worth next to zero one would claim that volume would drive revenue. This is true in the case of Google. Google keeps their operating costs at next to nothing given their size and they have an absurd number of people using the product. Google can then make some money based on impressions and clicks. This is not the same amount of money as they would be making if the same number of people were actually buying some product at a fixed margin from them, but a decent amount of money given their investment.
Google has an impending problem, which is that CPM near zero is rapidly becoming zero and the CPC next to zero is dropping to zero as well. Google can shuffle costs and can produce hardware and other products ( Google Play, Q, Drive, etc… ) to earn more money. In other words, Google is trying to figure out something else to do to earn profit. Facebook on the other hand has no other prospects, and they are not nearly as thrifty as Google. The next big thing, that people in the ad game are suggesting, will be social advertising, or that you will buy the same things that your friends. I don’t buy that, it is too easy to game, and the basic hypothesis is flawed, I think that there is a kernel of value there, but not enough to support multiple billions of dollars in revenue over 20 years.
I can not write Facebook or Yahoo completely off, however and here is why: Apple.
If you care to remember, Apple competed in two “dying” markets where there was “no more money to be earned” and the “barriers to entry were too high.” Those two markets were personal computers and portable music players. If we look at those two markets, we see that IBM, Dell, Compaq, HP and others were enjoying decent margins while Apple was slowly dying. When Steve Jobs came back to Apple, he focused relentlessly on improving the product and charging for it (AKA value for value ). He produced PCs and laptops that were outwardly the same as their competitors more or less with the exception of a few design flourishes. They produced a PMP that was competitive at first blush, but certainly not generations ahead of its competitors.
The reason that Apple later trounced them all was that in the race to the bottom, the focus was on what corners to cut. If someone was using resistors that had 5% tolerance, a competitor would drop it to 2% tolerance to save money and reduce the price to the customer. If someone was using hard-drives that had 36,000 hours MTBF ( Mean-Time Between Failures ) they would find someone to charge them less for drives that had 32,000 hours MTBF.
In this number-crunching mutually-assured destruction competition, everyone took their eyes off of the simple fact that what they were producing was shit, and it was becoming shittier by the generation. I can’t even say the word Compaq without thinking about burnt out toaster. They were the worst PCs ever.
Apple, at the time, kept making the best computers they possibly could, in every dimension. The software was top-notch, the hardware was top-notch. The Apple computer or iPod would look good, be easy to use, last forever, and if it didn’t they would replace it immediately. That has been changing a bit recently, but it was true for their PMPs and computers in the very early 21st century. As such, Apple could easily charge 20% to 40% more for a comparable item than their erstwhile foes. HP, IBM, Dell, and Compaq, however couldn’t understand how they were doing it, or why their customers were defecting to Macs. It didn’t make sense to them, why would someone want to pay so much more for a similar product. Most of them thought it was an anomalous blip, that there must just be more artsy people than they had originally thought.
What they didn’t understand was that many people just got sick of taking computers back, dealing with stonewalling customer service, etc… They just wanted something that worked. After the 3rd or 4th failure, they probably were complaining about it to a friend who said, well I have a Mac, and if something is wrong I just take it in and they take care of it ( social advertising for you ). That is all it takes for most people when they are completely ready to buy something else that really solves their need or want. In other words, value for value. In fact, probably because the others set a floor so low for the products, it helped with the image of Apple as high-end, cementing the enhanced value of what Apple was offering in their minds.
I digress. I would argue that Facebook has an opportunity to not enter this awful battle to the bottom for online advertising. They could try to do something that provides real, true value for people. I have no idea what this looks like, probably being right there when someone decides to buy something, to help them find the exact right product, similar to Amazon, who I view more as an advocate for me, helping me find just the right thing when I want it, not before or after. Or maybe they could go the sinister way and try to make me buy crap that I don’t need through Psycho-analysis and data mining. Either way would make them truckloads of money, but it has to be high quality.
There is still one point of caution for anyone involved in mobile or online advertising, or anyone thinking about investing in that space. Apple, that great beacon that refused to battle to the bottom, tried to do something new and fresh with advertising – iAd. It failed. If they can’t do it, perhaps no one can.
Posted: May 30th, 2012 | Author: irv | Filed under: android, Apple, Companies, Facebook, Google, Microsoft, Verizon | Tags: android, Apple, Google, iOS, Microsoft, mobile, windows phone | No Comments »
This weekend I switched back, once again, to Windows Phone from my ICS packing Galaxy Nexus. Previously, I had switched to Windows Phone from my Froyo ( can you believe this phone was launched in the US with Froyo? ) Infuse 4G. I seem to always switch away from Android eventually, and I haven’t been sure why, until now. This is not meant to be an Android hate fest, I don’t want to say I hate iOS, and I don’t hate any OS. I am a huge fan of iOS and Android, nor am I a fanboy of any camp ( any more ).
I think that Android is an excellent implementation of the vision for which it was designed. iOS was the first and is still the leader in its category. Both of which are largely cut from the same cloth. Who copied whom, I’ll leave for history to decide. For the my purposes, however I am happier with Windows Phone, and I have finally figured out why.
Windows Phone is Designed Around Use Cases
As I was transitioning between my various Android handsets, my iPad, and my new Lumia 900, I kept thinking about what it was in Windows Phone that kept causing me to want to use it. The browser is merely sufficient, the hardware is technically behind the curve ( while the phone hardware as a package is superlative, hats off Nokia ), and the OS is, well… different. One of the core things, which was immediately apparent, was that it didn’t take long for me to get to what I wanted to do with the Lumia from the live tile home screen.
I don’t subscribe to the “Smoked by Windows Phone” campaign, I think that was stupid and wrong. Android is typically faster in specific areas, like time to app launch, etc… iOS smokes both of them in scrolling and touch screen responsiveness as well as time to app readiness on the newer iPad2/3 and iPhone 4S. Windows Phone’s speech to text is great, but not comprehensive; Android’s speech to text is better than Windows Phones, Siri’s voice recognition is marginally better than Androids, if only because of her witty retorts.
Despite all of the shortcomings I have just described, I still prefer Windows Phone. For a few months, after I started with Windows Phone 7 on my Focus S, I started to think something was wrong with me for liking it. Maybe I was a “feature phone” kind of guy after all. The tech media kept telling me that Android and iOS are better because of their broader app selection, more sophisticated chips, hardware, etc… I could readily agree with this assessment, after all, Windows Phone doesn’t have NBA Jam, or Angry Birds Space. The more I thought about it however, as far as I am concerned, I prefer to use my phone for communication first, and apps second. Being presented with a grid of apps, or strange widgets, or the wrong panel of the launcher were all in the way of simple communication.
When I use Windows Phone, it is clear, I press people for communication, me for updating my social networks, phone for calls. This simplicity, and clarity; that is what keeps drawing me back. It isn’t that Windows Phone is faster in any way than Android and iOS, not that it is slow. It is that each specific task that I want to do with the phone has a well defined path, is clearly encapsulated, and is a complete end-to-end experience with no cruft. It isn’t chaotic like the Android intent system, leading me all over the place from app-to-app, it isn’t ridiculously siloed like iOS. Things that should be combined, like Facebook and twitter are grouped together. Games are all in the same place, and share a coherent experience that is clearly differentiated from the other flows for when I want to play games. Music, podcasts, and audio are all together, unified in their Zune experience, which also is differentiated from the game flow, and the social flow.
Android and iOS are Designed Like Desktop/Tablet OS’s
Once I began to think about use-cases, I started to see how ill fitted Android and iOS were for the phone. I started to put devices into categories based on these use cases, to try to figure out where they go wrong.
When using my desktop / laptop, I am consciously sitting down to perform some fairly complicated task, I expect to have to make lots of decisions to perform that task, and I do not mind the complexity of the windowing system.
When using my tablet, I am typically settling down to enjoy some content, a game, a book, a fun diversionary app, or I am attempting to use a productivity app, for which I could perhaps perform the task on my desktop / laptop. I don’t mind actions taking a little extra time on my Tablet, I am expecting to explore and engage in an experience.
My phone is different. I am not typically trying to explore. I am trying to find a restaurant to eat at right now, or I am looking for my friends house and I am wandering around trying to read street numbers. I am buying something and need to compare prices. I am trying to call someone to have a conversation. In short, most of what I am doing with my phone is immediate I don’t want to browse.
The grid of apps, is really nice for presenting an experience, it is an invitation to browse, to wade into an entire universe of possibilities. A bunch of apps is great for when I want to spend time looking around, like window shopping. I don’t necessarily know what I want to do, I just want to be entertained.
I don’t really need apps on my phone, I need the workflows that are in those apps. I need the restaurant information inside of the Zagat application, I need the directions and augmented reality that is inside of google/bing maps. I need the social graph that is inside of Facebook to find out if my friends are busy this weekend. I need the content of the twitter app to find out what is going on right now. As far as exposing that, some apps for Windows Phone can do this with their live tile, for other, well designed Windows Phone apps, there is a clear use case for the application, and it brings as much content to me as it can to assist me with doing something right now.
Windows phone isn’t perfect, there are still quite a few missing use cases that I would like to see fleshed out, like the augmented reality directions, or a better workflow around photo sharing.
When you think about things in use cases, you actually start to see that the multitasking system that Windows Phone employes is correct. It is only broken if you are looking at it as you would look at Android or iOS, or if you are comparing your mobile computing environment to one that is less mobile. Windows Phone is better thought out than its competitors. Once you let go of the fact that you believe you want your smart phone to be just like your desktop/laptop/tablet, then everything will be fine.
So what if Windows Phone doesn’t have many quality apps, for most of the things I want to do, I am covered. As they add apps, so much the better, I only hope that the developers think about how their users will accomplish tasks in real-time with the applications they provide, and don’t fall back on the Android and iOS way of sticking a bunch of data into a silo and expecting the user to poke around to find it.
Windows 8, in its current incarnation is half-mistake, in my opinion. For the designers to take UI and a set of interactions that are successful for phone use cases, and apply them to a desktop OS is to turn something useful into a chaotic chimera. I believe that Microsoft is not allowing for as much richness and complexity as the interaction patterns of a stationary computing experience should provide by implementing the Metro interface on the desktop.
In the legacy interface, they are just screwing up what was working. It makes sense for them to take the same approach as they allowed the Windows Mobile team to take. Think about the use cases that people are likely to encounter when they are attempting to accomplish something with their desktop/tablets. You may not be able to unify the interfaces, it is OK. Apple is falling into the same trap, it is leaving a massive opening for someone to do something awesome with the desktop computer…. Canonical are you listening?
Let it go, the desktop paradigm is dead. Stop worrying about how things used to be and learn to experience Windows Phone for what it is. A beautiful breath of fresh-air, a new way of thinking about mobile interaction. Hopefully Microsoft doesn’t screw it up. If their marketing is any indication, I am worried about the future. If they leave the Windows Phone team alone, and allow them to keep doing what they are doing, things will be great.
Posted: April 19th, 2012 | Author: irv | Filed under: Amazon, Apple, Companies, Facebook, Google | Tags: amazon, analytics, bezos, big data, great, jeff, metrics, strategy, Web | No Comments »
For reasons unknown, it seems that the tech media completely fails to give Jeff Bezos and Amazon the recognition that they deserve. I believe that this is due to a deliberate strategy executed by Amazon to quietly grab as much mind and market share as they can. If they continue on their trajectory, they may become unassailable, in fact, they may be already.
There are blogs and podcasts called things like Apple Insider, This Week In Google, Mac Break Weekly, etc… I have yet to hear about any blogs or podcasts about what Amazon is doing week-in and week-out, but in many ways it is much more interesting. Amazon now handles 1% of consumer internet traffic, pushing all of through its near ubiquitous compute cloud infrastructure. They are rapidly and efficiently dismantling existing retail. Amazon is probably on their way to completely owning web commerce. Amazon has mass amounts of data on what people have, want, and will want based on what they own and buy. Through their mobile applications they are gathering pricing signals from competitors so that they can use their own cluster computing prowess to spot change pricing.
What is shocking about this is, despite their proficiency, no one discusses how absurdly dominant Amazon has become. Everyone just treats Amazon running all internet commerce and large swaths of its infrastructure as “the way it is.” Amazon is more a force of nature at this point than a company.
It isn’t just the tech media that doesn’t give them the credit they deserve, major tech companies aren’t either. Google and Apple seem ready to laugh off the Kindle Fire while Amazon soaks up more signals. Microsoft doesn’t even try to match them. Google’s commerce efforts look half-baked compared to what Amazon does, and they show no signs of trying to do better.
It is absurd to think that with the bitter rivalries we constantly hear about between Apple and Google, Microsoft and Google, Microsoft and Apple, etc… that someone would start a podcast about Amazon. Fifty years from now technology changes will have toppled Apple, Google, Facebook, and Microsoft, but I’d bet that Amazon would still be around.
Jeff Bezos and his company wield algorithms and data more effectively than anyone else in the industry, despite all the credit we give Google for search. Their suggestion and comment filtering algorithms are bar none, the best around. Amazon is integrated into the fabric of our lives and that is something that no other tech company has done to that level.
Amazon will keep doing what Amazon does best, being ruthless, being efficient, executing better than anyone else, and staying ahead of the curve. As long as we keep ignoring them they are doing their job. The greatest trick Amazon ever pulled was convincing the world that they didn’t exist. They have convinced the world that they are just retail.
Posted: January 21st, 2012 | Author: irv | Filed under: AT&T, Companies, Facebook, Google, Management, Microsoft, Twitter | Tags: anti-trust, doj, facebook, Google, ibm, Media, Microsoft, social, twitter | No Comments »
When Google added world plus social, at first I didn’t think there was much of a problem. I understood that since Twitter and Facebook limit the ways in which Google interacted with them, it wasn’t really possible for Google to offer truly social search. This cabal between Facebook and Twitter is quite obviously hugely damaging to Google’s future interests as a company. So I also supported the need for Google Plus.
However, as I have been thinking about it, most companies in the past have gotten into trouble, become anti-competitive, or foes of the free market under the banner of simply looking out for their business interests in responding to a threat. Inside most potential monopolies, the issue that crops up after smashing a formidable challenge is when to stop.
Google is promoting G+ as the bulk of its social search, G+ is completely unavoidable as you are using the search engine. This puts Facebook and Twitter at something of a disadvantage. They also promote YouTube in a similar in-your-face manner, putting Vimeo and other web video companies at a disadvantage.
It isn’t hard to imagine a world in which startups don’t even look at web video because YouTube is un-assailable. Similarly one could imagine, though it is more of a stretch, that eventually Facebook and Twitter would whither and die at the hands of Google Plus since there is really only one search engine, and the entire world uses it. That world would be ridiculously anti-competitive, and no one, including Google really wants to see that.
I believe that if Google had had its just desserts, Facebook and twitter would have given it unfettered access to their data, and Google Plus would have been unnecessary. But since they didn’t G+ is more than beneficial for Google’s survival, it is essential. The same thing could be said about YouTube and Google Music in the face of iTunes.
One could argue as well that Google hasn’t been very effective of late at controlling what is going on within the company. Clearly there is a massive amount of resource contention, and a general challenge in keeping everyone on the same page, and playing for the same team. In addition, there is the kind of limited thinking that prevents the company from disrupting its own business units. Microsoft had(has) this problem, so did IBM, and so did AT&T.
AT&T, however operated like a well oiled machine, they had no problem crushing all competition and effectively responding to all challengers. Google is just as innovative as AT&T used to be, they will similarly get through their management issues, in fact I think they are very near this point. Google getting through their effectiveness issues however, is exactly what bothers me; Once they become as effective as AT&T used to be, isn’t that where the government steps in?
So what I propose instead is that Google break itself into separate businesses voluntarily. One of the main rules of business today is never to let a competitor, or government, disrupt you. It is better, and more profitable to disrupt yourself. I would suggest to Google, for this reason, that now is a good time to do it.
I would imagine that Google would become 5 corporations, split along the lines of social, media, search, mobile, and advertising. This would see Google Plus, Reader, Gmail, Google Talk and Google Docs become the Google Social business. Google docs may initially seem like a strange product to call social, but the purpose of Google Docs is to collaborate on work. That is pretty social as far as I’m concerned, in fact, it is probably the most social that people are in general.
The media business would consist of YouTube, Google Music, Google TV, and the nascent Google Games. The search business is self explanatory. Mobile would be Android, but also Motorola with the new purchase. And Google advertising would be their display, print, and television advertising business. Each company could retain a small portion of ownership of the other company that it was dependent upon. For example, Google media might maintain a 5% to 10% stake in Google social such that they can be sure that their requests are heard and honored. All of the business would have a small share of the advertising business, but the total should not add up to more than 40% so that the advertising business could remain autonomous.
The resulting companies would end up becoming far more competitive and profitable than their corresponding business units, due primarily to the need for providing open APIs to the other businesses that need their services. In the process, these businesses would make these APIs available to other startups who could build off of Google’s services as a platform, driving further profitability and end user lock in.
This would in turn surround their competitors, who are still just a simple silo, and who would begin to run into anti-trust concerns themselves. The now ridiculously nimble Google, which could be known as the Googles, would have them surrounded.
As a single entity Google is vulnerable to the same diseases which have, in the past, felled their erstwhile competitors. As multiple independent profitable companies, the Googles could remain dominant for decades. This would be better for the industry as a whole because each Google business with public APIs would provide a platform for numerous job creating profitable startups. C’mon Google, do what is right for the market, and for your business. Don’t wait for the DOJ to hold a gun to your head like AT&T. Even with the government forcing the issue with AT&T, being broken into the baby bells seems to have worked out pretty well for them.