Valley Venture

Why micropayment will fail

valleyventure — Thu, 08 Oct 2009 21:37:43 +0000

Fame vs Fortune: Micropayments and Free Content

First published September 5, 2003 on the “Networks, Economics, and Culture” mailing list.
Subscribe to the mailing list.

Micropayments, small digital payments of between a quarter and a fraction of a penny, made (yet another) appearance this summer with Scott McCloud’s online comic, The Right Number, accompanied by predictions of a rosy future for micropayments.To read The Right Number, you have to sign up for the BitPass micropayment system; once you have an account, the comic itself costs 25 cents.

BitPass will fail, as FirstVirtual, Cybercoin, Millicent, Digicash, Internet Dollar, Pay2See, and many others have in the decade since Digital Silk Road, the paper that helped launch interest in micropayments. These systems didn’t fail because of poor implementation; they failed because the trend towards freely offered content is an epochal change, to which micropayments are a pointless response.

The failure of BitPass is not terribly interesting in itself. What is interesting is the way the failure of micropayments, both past and future, illustrates the depth and importance of putting publishing tools in the hands of individuals. In the face of a force this large, user-pays schemes can’t simply be restored through minor tinkering with payment systems, because they don’t address the cause of that change — a huge increase the power and reach of the individual creator.

Why Micropayment Systems Don’t Work

The people pushing micropayments believe that the dollar cost of goods is the thing most responsible for deflecting readers from buying content, and that a reduction in price to micropayment levels will allow creators to begin charging for their work without deflecting readers.

This strategy doesn’t work, because the act of buying anything, even if the price is very small, creates what Nick Szabo calls mental transaction costs, the energy required to decide whether something is worth buying or not, regardless of price. The only business model that delivers money from sender to receiver with no mental transaction costs is theft, and in many ways, theft is the unspoken inspiration for micropayment systems.

Like the salami slicing exploit in computer crime, micropayment believers imagine that such tiny amounts of money can be extracted from the user that they will not notice, while the overall volume will cause these payments to add up to something significant for the recipient. But of course the users do notice, because they are being asked to buy something. Mental transaction costs create a minimum level of inconvenience that cannot be removed simply by lowering the dollar cost of goods.

Worse, beneath a certain threshold, mental transaction costs actually rise, a phenomenon is especially significant for information goods. It’s easy to think a newspaper is worth a dollar, but is each article worth half a penny? Is each word worth a thousandth of a penny? A newspaper, exposed to the logic of micropayments, becomes impossible to value.

If you want to feel mental transaction costs in action, sign up for the $3 version of BitPass, then survey the content on offer. Would you pay 25 cents to view a VR panorama of the Matterhorn? Are Powerpoint slides on “Ten reasons why now is a great time to start a company?” worth a dime? (and if so, would each individual reason be worth a penny?)

Mental transaction costs help explain the general failure of micropayment systems. (See Odlyzko, Shirky, and Szabo for a fuller accounting of the weaknesses of micropayments.) The failure of micropayments in turn helps explain the ubiquity of free content on the Web.

Fame vs Fortune and Free Content

Analog publishing generates per-unit costs — each book or magazine requires a certain amount of paper and ink, and creates storage and transportation costs. Digital publishing doesn’t. Once you have a computer and internet access, you can post one weblog entry or one hundred, for ten readers or ten thousand, without paying anything per post or per reader. In fact, dividing up front costs by the number of readers means that content gets cheaper as it gets more popular, the opposite of analog regimes.

The fact that digital content can be distributed for no additional cost does not explain the huge number of creative people who make their work available for free. After all, they are still investing their time without being paid back. Why?

The answer is simple: creators are not publishers, and putting the power to publish directly into their hands does not make them publishers. It makes them artists with printing presses. This matters because creative people crave attention in a way publishers do not. Prior to the internet, this didn’t make much difference. The expense of publishing and distributing printed material is too great for it to be given away freely and in unlimited quantities — even vanity press books come with a price tag. Now, however, a single individual can serve an audience in the hundreds of thousands, as a hobby, with nary a publisher in sight.

This disrupts the old equation of “fame and fortune.” For an author to be famous, many people had to have read, and therefore paid for, his or her books. Fortune was a side-effect of attaining fame. Now, with the power to publish directly in their hands, many creative people face a dilemma they’ve never had before: fame vs fortune.

Substitutability and the Deflection of Use

The fame vs fortune choice matters because of substitutability, the willingness to accept one thing as a substitute for another. Substitutability is neutralized in perfect markets. For example, if someone has even a slight preference for Pepsi over Coke, and if both are always equally available in all situations, that person will never drink a Coke, despite being only mildly biased.

The soft-drink market is not perfect, but the Web comes awfully close: If InstaPundit and Samizdata are both equally easy to get to, the relative traffic to the sites will always match audience preference. But were InstaPundit to become less easy to get to, Samizdata would become a more palatable substitute. Any barrier erodes the user’s preferences, and raises their willingness to substitute one thing for another.

This is made worse by the asymmetry between the author’s motivation and the reader’s. While the author has one particular thing they want to write, the reader is usually willing to read anything interesting or relevant to their interests. Though each piece of written material is unique, the universe of possible choices for any given reader is so vast that uniqueness is not a rare quality. Thus any barrier to a particular piece of content (even, as the usability people will tell you, making it one click further away) will deflect at least some potential readers.

Charging, of course, creates just such a barrier. The fame vs fortune problem exists because the web makes it possible to become famous without needing a publisher, and because any attempt to derive fortune directly from your potential audience lowers the size of that audience dramatically, as the added cost encourages them to substitute other, free sources of content.

Free is a Stable Strategy

For a creator more interested in attention than income, free makes sense. In a regime where most of the participants are charging, freeing your content gives you a competitive advantage. And, as the drunks say, you can’t fall off the floor. Anyone offering content free gains an advantage that can’t be beaten, only matched, because the competitive answer to free — “I’ll pay you to read my weblog!” — is unsupportable over the long haul.

Free content is thus what biologists call an evolutionarily stable strategy. It is a strategy that works well when no one else is using it — it’s good to be the only person offering free content. It’s also a strategy that continues to work if everyone is using it, because in such an environment, anyone who begins charging for their work will be at a disadvantage. In a world of free content, even the moderate hassle of micropayments greatly damages user preference, and increases their willingness to accept free material as a substitute.

Furthermore, the competitive edge of free content is increasing. In the 90s, as the threat the Web posed to traditional publishers became obvious, it was widely believed that people would still pay for filtering. As the sheer volume of free content increased, the thinking went, finding the good stuff, even if it was free, would be worth paying for because it would be so hard to find.

In fact, the good stuff is becoming easier to find as the size of the system grows, not harder, because collaborative filters like Google and Technorati rely on rich link structure to sort through links. So offering free content is not just an evolutionary stable strategy, it is a strategy that improves with time, because the more free content there is the greater the advantage it has over for-fee content.

The Simple Economics of Content

People want to believe in things like micropayments because without a magic bullet to believe in, they would be left with the uncomfortable conclusion that what seems to be happening — free content is growing in both amount and quality — is what’s actually happening.

The economics of content creation are in fact fairly simple. The two critical questions are “Does the support come from the reader, or from an advertiser, patron, or the creator?” and “Is the support mandatory or voluntary?”

The internet adds no new possibilities. Instead, it simply shifts both answers strongly to the right. It makes all user-supported schemes harder, and all subsidized schemes easier. It likewise makes collecting fees harder, and soliciting donations easier. And these effects are multiplicative. The internet makes collecting mandatory user fees much harder, and makes voluntarily subsidy much easier.

Weblogs, in particular, represent a huge victory for voluntarily subsidized content. The weblog world is driven by a million creative people, driven to get the word out, willing to donate their work, and unhampered by the costs of xeroxing, ink, or postage. Given the choice of fame vs fortune, many people will prefer a large audience and no user fees to a small audience and tiny user fees. This is not to say that creators cannot be paid for their work, merely that mandatory user fees are far less effective than voluntary donations, sponsorship, or advertising.

Because information is hard to value in advance, for-fee content will almost invariably be sold on a subscription basis, rather than per piece, to smooth out the variability in value. Individual bits of content that are even moderately close in quality to what is available free, but wrapped in the mental transaction costs of micropayments, are doomed to be both obscure and unprofitable.

What’s Next?

This change in the direction of free content is strongest for the work of individual creators, because an individual can produce material on any schedule they like. It is also strongest for publication of words and images, because these are the techniques most easily mastered by individuals. As creative work in groups creates a good deal of organizational hassle and often requires a particular mix of talents, it remains to be seen how strongly the movement towards free content will be for endeavors like music or film.

However, the trends are towards easier collaboration, and still more power to the individual. The open source movement has demonstrated that even phenomenally complex systems like Linux can be developed through distributed volunteer labor, and software like Apple’s iMovie allows individuals to do work that once required a team. So while we don’t know what ultimate effect the economics of free content will be on group work, we do know that the barriers to such free content are coming down, as they did with print and images when the Web launched.

The interesting questions regarding free content, in other words, have nothing to do with bland “End of Free” predictions, or unimaginative attempts at restoring user-pays regimes. The interesting questions are how far the power of the creator to publish their own work is going to go, how much those changes will be mirrored in group work, and how much better collaborative filters will become in locating freely offered material. While we don’t know what the end state of these changes will be, we do know that the shift in publishing power is epochal and accelerating.

First published September 5, 2003 on the “Networks, Economics, and Culture” mailing list.
Subscribe to the mailing list.

Micropayment vs microreward

valleyventure — Wed, 07 Oct 2009 10:05:17 +0000

Earlier this week, Jeff Reifman of Newscloud wrote an essay, “How Micro-payments Could Save Journalism,” which he says was inspired by most recent Editor & Publisher column, “Your News Content Is Worth Zero to Digital Consumers.” (I’m a bit slow to respond due to a busy work week.)

Reifman wrote: “I disagree with the premise of Steve Outing’s column last week. … I think consumers will pay for news content and that an aggregated micro-payment system has a place in solving the sustainability challenge facing journalism.”

In general, Reifman and I simply disagree, and you can read both articles yourself if you’d like to compare and contrast our views. (You’ll discover that both of us wrote headlines that overstate and exaggerate our positions!)

Rather than a point-by-point rebuttal of Reifman’s article (and I do find some good ideas in his writing), I want to suggest an alternative to one idea he pitched: turning on a counter or meter so that a website or blog reader sees how often he/she has used your site. He wrote:

“Place widgets on each page that show readers quantitatively how many stories they’ve read and how much time they’ve been spending on your site. … Set a threshold at which you expect readers to start paying.”

Now, I see that as essentially a negative approach. Let’s determine who our best customers are, then “punish” them by demanding that they start paying small amounts.

Here’s what I’d rather see. I like the idea of telling a reader how much they’ve used your website. If their personal counter widget clearly shows that they put a lot of time into viewing content on your site, then that’s a social cue to “do the right thing” and voluntarily donate some money to support it. (The donation mechanism must be fast and super easy.)

But just as Reifman admits that micro-payments alone won’t solve the news industry’s problems, neither will a donation strategy alone.

So let’s go one step further, and turn Reifman’s negative approach into a positive one! Instead of the counter or meter punishing a web user for over-using your website, reward that frequent user! Turn the personal counter into a tool to encourage more visits. (Most newspaper websites, in particular, have a problem with low average visits-per-month by users.)

This can be as simple and low-cost as making it a game. The “reward” for being in the top 10 users of a site in any month might be nothing more than being highlighted as one of the site’s biggest fans. (Run a photo of your site’s most frequent visitor each week.) Better would be some tangible reward, in the same sort of way that airline affinity programs reward you with points to be accrued and used to get free plane tickets. Reward points to individual users for visiting your site often; they might “spend” the points accrued over multiple visits on accessing the limited amount of premium content on your site rather than having to pay real money.

Or reward frequent visitors with real prizes: The most-frequent site users could win free-meal restaurant coupons or ski lift tickets from advertisers. The top 10 visitors could be entered into a drawing for a weekly prize supplied by an advertiser. I’m sure you can think of many more variations.

Will my approach save the news industry? No, of course not. But I think that Reifman’s micro-payment strategy will bring in little revenue, and turn off lots of online users of your site because of the negative nature of the strategy. By taking the positive approach, news sites can actually encourage more intentional repeat visits. User behavior is clearly trending toward people finding news on your website via other referral sources, rather than purposefully visiting your specific site. A positive “reward” strategy at least has the potential to encourage more loyalty and repeat visits.

None of this solves the news industry’s crisis. I think my positive spin on user usage-feedback could be one little piece of the puzzle. I put more faith in strategies like membership programs, charging for unique niche content (i.e., low pay-walls), network donation solutions (which I’ve written lots about in recent months), and improvements in online advertising. (In fact, I’m feeling more bullish about online advertising for news websites — for the first time in a long time — after learning about some developments that could be game-changing for media companies. Since I typically respect embargo requests from companies, I won’t be writing on that topic until a bit later on.)

21 iPhone Food Apps to Eat Your Heart Out

valleyventure — Mon, 27 Oct 2008 23:30:10 +0000

21 iPhone Food Apps to Eat Your Heart Out

August 13, 2008 – 7:05 am PDT – by Amanda MacArthur 17 Comments

Sure there are plenty of foodie sites online like Yelp, Zeer, Dishola and tons more. But how many have actually merged into the iPhone space, the most portable way to figure out what you want to eat?

Here are 21 food-related iPhone apps, both free and paid, that will let you eat your heart out:

Where (free) – A location-based app that works with Yelp as well as Starbucks. So you can find food and your coffee wherever you are. The app also works with GasBuddy (for the cheapest gas nearby), Eventful, Buddy Beacon, ZipCar, and Quibblo Quizzes.

Yelp (free) – The Yelp app is GPS-enabled and will find you places to eat nearby (amongst other things). The problem with this app is that it lacks Yelp’s best feature – the ability to review.

UrbanSpoon (free) – A fun app if you’re close to a city. It’s not as limited as the LocalEats app (above), but you’re not going to find anything nearby if you’re more than 20 miles from a city. It’s a slot machine application that lets you pick how much you want to spend or what kind of meal you want to eat. You shake the iPhone and it gives you a list of results within the categories you selected.

iFob (free) – This app goes against GPS technology and encourages Wi-fi connections. So when you’re at a restaurant that has wi-fi, you can walk away with a friend? The idea is to connect people that are within close range of each other. So maybe you’ll have an eating partner.

Restaurant Nutrition (free) – The most disturbing of the nutrition fact iPhone apps is this one. It lists the nutrition facts for most popular chain restaurants. You won’t believe how many grams of fat are in a chicken caesar wrap at Chili’s.

iWant (free) – A (possibly better) version of the Where To app (below) that’s free. Like the Where To app, it works easily like the POI navigation on a GPS device. Easy to use, easy to drive with. It has 3.5 stars at the iTunes store with the biggest complaint being that it doesn’t list enough results under some categories.

Nearby (free) – Works like other geo-locating apps, you search for things around you; only this time there will be various types of commentary about a particular spot: photos, notes, reviews and “virtual graffiti”.

YPMobile (free) – When worse comes to worse, hit up the Yellow Pages.

Where To ($2.99) – This is a cool little app that works like the POI (point of interest) function on a regular GPS. It finds your location, you choose a category, and it finds all of the places in that category that are near you. Food & Drink is just one of the 600 categories that you can choose from. It works kind of like a front-end to Google Search, however makes using it while on the road very easy and simple to use. Is it worth the $2.99? Well that’s less than a tank of gas in most places, so sure.

LocalEats ($0.99) – Based on the site wherethelocalseat.com, this app gives you the best 100 restaurants in the top 50 U.S. cities. The interface is extremely easy to use and it mostly avoids chain restaurants. The downside is that it’s only applicable if you’re near or in a big city. Still has 4 out of 5 stars at the app store.

There are also some good Web apps for foodies:

Menus – Offers menus for many fast food restaurants and includes a Google Maps link so that you can direct yourself to the nearest drive-thru.

TopChef Recipe Finder – Hosted by the Bravo network, this Web app will help you find recipes when you’re grocery shopping or just plain looking for something to make. AOL Recipes and 101Cookbooks are other Web apps like this.

iFood – If you’re feeling like an extra fat day, you can turn your phone into a slice of pizza, bag of popcorn and other things with this app.

CookBook – So you have all these ingredients in your house but you’re not sure what to make with them. This Web app will let you input ingredients and will try to come up with some recipes that you can make using those ingredients.

Steak Timer – You didn’t think someone would spend the time on this one did you? Yeah this little Web app shows a piece of steak on a timer from raw to well done. I think I’d do the meat thermometer test first though before trusting this app.

GrubOntheGo – A little Web app that has you enter what you’re craving and where you are. Will display local results and the distance (approximately) from your location. A lot like the other iPhone apps but I like the twist of “what you’re craving”.

And when you’re done, maybe you should download the FatWatch app. Mmm… I’m hungry already.

Five trends in mobile devices from Gartner

valleyventure — Thu, 11 Sep 2008 00:15:27 +0000

Five Trends in Mobile Devices

Gartner has identified five key trends it says will affect the mobile device market through 2009:

Established Vendors Consolidate and New Players Join the Fray: New device vendors, such as Apple and Garmin, want to differentiate themselves, while big-name vendors, such as Motorola, face pressure as market shares decline and design innovation becomes increasingly challenging.
Device Vendors Build Out Ecosystems: Pressure from operators to lower the price of devices will drive some established players to seek out new sources of revenue from content and services sold to end users. This trend is epitomised by Nokia with Ovi, Sony Ericsson with PlayNow and Apple with its iTunes store. This new market will bring changes in relationships between vendors, operators and content providers.
Device Makers Remove Complexity for Users: Increasing device functionality and a need for differentiation will drive demand to simplify the user interface (UI) and service experience. As a consequence, mobile device vendors will need to build up their UI competencies while retaining familiarity and considering how users can move horizontally across their devices’ applications, rather than just vertically within them.
Mobile Devices Become Lifestyle Statements: Style will play more of a role across the range of devices, driven not only by fashion trends but also by consumers’ desires to reinforce lifestyle choices. Vendors need to have established platforms on which small changes to casings and colors can be made without affecting costs. They will also need to consider partnering with non-mobile companies and brands – such as consumer electronics, fashion or sports companies – to increase the lifestyle appeal and consumer reach of their products.
High-End Device Platforms Become “Field-Refreshable:” As cellular technologies become part of increasingly expensive consumer devices, vendors must manage ongoing support, upgrades and enhancement of drives. Because many users will hold onto high-end devices longer, these platforms will need more life cycle management in the form of upgrades and enhancements. Some vendors are implementing these “field refreshes” that can be made to support new digital rights management (DRM) requirements, download bug fixes, or download new applications, wallpapers or skins to keep devices up-to-date.

10 Future Web Trends

valleyventure — Wed, 12 Mar 2008 06:23:13 +0000

10 Future Web Trends

Written by Richard MacManus / September 5, 2007 12:22 PM / 66 Comments

digg_url = ‘http://www.readwriteweb.com/archives/10_future_web_trends.php’; digg_bgcolor = ‘#ffffff’; digg_skin = ‘compact’;

We’re well into the current era of the Web, commonly referred to as Web 2.0. Features of this phase of the Web include search, social networks, online media (music, video, etc), content aggregation and syndication (RSS), mashups (APIs), and much more. Currently the Web is still mostly accessed via a PC, but we’re starting to see more Web excitement from mobile devices (e.g. iPhone) and television sets (e.g. XBox Live 360).

What then can we expect from the next 10 or so years on the Web? As NatC commented in this week’s poll, the biggest impact of the Web in 10 years time won’t necessarily be via a computer screen – “your online activity will be mixed with your presence, travels, objects you buy or act with.” Also a lot of crossover will occur among the 10 trends below (and more) and there will be Web technologies that become enormously popular that we can’t predict now.

Bearing all that in mind, here are 10 Web trends to look out for over the next 10 years…

1. Semantic Web

Sir Tim Berners-Lee’s vision for a Semantic Web has been The Next Big Thing for a long time now. Indeed it’s become almost mythical, like Moby Dick. In a nutshell, the Semantic Web is about machines talking to machines. It’s about making the Web more ‘intelligent’, or as Berners-Lee himself described it: computers “analyzing all the data on the Web ‚Äì the content, links, and transactions between people and computers.” At other times, Berners-Lee has described it as “the application of weblike design to data” – for example designing for re-use of information.

As Alex Iskold wrote in The Road to the Semantic Web, the core idea of the Semantic Web is to create the meta data describing data, which will enable computers to process the meaning of things. Once computers are equipped with semantics, they will be capable of solving complex semantical optimization problems.

So when will the Semantic Web arrive? The building blocks are here already: RDF, OWL, microformats are a few of them. But as Alex noted in his post, it will take some time to annotate the world’s information and then to capture personal information in the right way. Some companies, such as Hakia and Powerset and Alex’s own AdaptiveBlue, are actively trying to implement the Semantic Web. So we are getting close, but we are probably a few years off still before the big promise of the Semantic Web is fulfilled.

Semantic Web pic by dullhunk

2. Artificial Intelligence

Possibly the ultimate Next Big Thing in the history of computing, AI has been the dream of computer scientists since 1950 – when Alan Turing introduced the Turing test to test a machine’s capability to participate in human-like conversation. In the context of the Web, AI means making intelligent machines. In that sense, it has some things in common with the Semantic Web vision.

We’ve only begun to scratch the surface of AI on the Web. Amazon.com has attempted to introduce aspects of AI with Mechanical Turk, their task management service. It enables computer programs to co-ordinate the use of human intelligence to perform tasks which computers are unable to do. Since its launch on 2 November 2005, Mechanical Turk has gradually built up a following – there is a forum for “Turkers” called Turker Nation, which appears to have light-to-medium level patronage. However we reported in January that Mturk isn’t being used as much as the initial hype period in Nov-Dec 05.

Nevertheless, AI has a lot of promise on the Web. AI techniques are being used in “search 2.0″ companies like Hakia and Powerset. Numenta is an exciting new company by tech legend Jeff Hawkins, which is attempting to build a new, brain-like computing paradigm – with neural networks and cellular automata. In english this means that Numenta is trying to enable computers to tackle problems that come easy to us humans, like recognizing faces or seeing patterns in music. But since computers are much faster than humans when it comes to computation, we hope that new frontiers will be broken – enabling us to solve the problems that were unreachable before.

3. Virtual Worlds

Second Life gets a lot of mainstream media attention as a future Web system. But at a recent Supernova panel that Sean Ammirati attended, the discussion touched on many other virtual world opportunities. The following graphic summarizes it well:

Looking at Korea as an example, as the ‘young generation’ grows up and infrastructure is built out, virtual worlds will become a vibrant market all over the world over the next 10 years.

It’s not just about digital life, but also making our real life more digital. As Alex Iskold explained, on one hand we have the rapid rise of Second Life and other virtual worlds. On the other we are beginning to annotate our planet with digital information, via technologies like Google Earth.

4. Mobile

Mobile Web is another Next Big Thing on slow boil. It’s already big in parts of Asia and Europe, and it received a kick in the US market this year with the release of Apple’s iPhone. This is just the beginning. In 10 years time there will be many more location-aware services available via mobile devices; such as getting personalized shopping offers as you walk through your local mall, or getting map directions while driving your car, or hooking up with your friends on a Friday night. Look for the big Internet companies like Yahoo and Google to become key mobile portals, alongside the mobile operators.

Companies like Nokia, Sony-Ericsson, Palm, Blackberry and Microsoft have been active in the Mobile Web for years now, but one of the main issues with Mobile Web has always been usability. The iPhone has a revolutionary UI that makes it easier for users to browse the Web, using zooming, pinching and other methods. Also, as Alex Iskold noted, the iPhone is a strategy that may expand Apple’s sphere of influence, from web browsing to social networking and even possibly search.

So even despite the iPhone hype, in the US at least (and probably other countries when it arrives) the iPhone will probably be seen in 10 years time as the breakthrough Mobile Web device.

5. Attention Economy

The Attention Economy is a marketplace where consumers agree to receive services in exchange for their attention. Examples include personalized news, personalized search, alerts and recommendations to buy. The Attention Economy is about the consumer having choice – they get to choose where their attention is ’spent’. Another key ingredient in the attention game is relevancy. As long as the consumer sees relevant content, he/she is going to stick around – and that creates more opportunities to sell.

Expect to see this concept become more important to the Web’s economy over the next decade. We’re already seeing it with the likes of Amazon and Netflix, but there is a lot more opportunity yet to explore from startups.

Image from The Attention Economy: An Overview, by Alex Iskold

6. Web Sites as Web Services

Alex Iskold wrote in March that as more and more of the Web is becoming remixable, the entire system is turning into both a platform and the database. Major web sites are going to be transformed into web services – and will effectively expose their information to the world. Such transformations are never smooth – e.g. scalability is a big issue and legal aspects are never simple. But, said Alex, it is not a question of if web sites become web services, but when and how.

The transformation will happen in one of two ways. Some web sites will follow the example of Amazon, del.icio.us and Flickr and will offer their information via a REST API. Others will try to keep their information proprietary, but it will be opened via mashups created using services like Dapper, Teqlo and Yahoo! Pipes. The net effect will be that unstructured information will give way to structured information – paving the road to more intelligent computing.

Note that we can also see this trend play out currently with widgets and especially Facebook in 2007. Perhaps in 10 years time the web services landscape will be much more open, because the ‘walled garden’ problem is still with us in 2007.

Image from Web 3.0: When Web Sites Become Web Services, by Alex Iskold

7. Online Video / Internet TV

This is a trend that has already exploded on the Web – but you still get the sense there’s a lot more to come yet. In October 2006 Google acquired the hottest online video property on the planet, YouTube. Later on that same month, news came out that the founders of Kazaa and Skype were building an Internet TV service, nicknamed The Venice Project (later named Joost). In 2007, YouTube continues to dominate. Meanwhile Internet TV services are slowly getting off the ground.

Our network blog last100 has an excellent overview of the current Internet TV landscape, with reviews of 8 Internet TV apps. Read/WriteWeb’s Josh Catone also reviewed 3 of them – Joost, Babelgum, Zattoo.

It’s fair to say that in 10 years time, Internet TV will be totally different to what it is today. Higher quality pictures, more powerful streaming, personalization, sharing, and much more – it’s all coming over the next decade. Perhaps the big question is: how will the current mainstream TV networks (NBC, CNN, etc) adapt?

Zattoo, from Internet Killed The Television Star: Reviews of Joost, Babelgum, Zattoo, and More, by Josh Catone

8. Rich Internet Apps

As the current trend of hybrid web/desktop apps continues, expect to see RIA (rich internet apps) continue to increase in use and functionality. Adobe’s AIR platform (Adobe Integrated Runtime) is one of the leaders, along with Microsoft with its Windows Presentation Foundation. Also in the mix is Laszlo with its open source OpenLaszlo platform and there are several other startups offering RIA platforms. Let’s not forget also that Ajax is generally considered to be an RIA – it remains to be seen though how long Ajax lasts, or whether there will be a ‘2.0′.

As Ryan Stewart wrote for Read/WriteWeb back in April 2006 (well before he joined Adobe), “Rich Internet Apps allow sophisticated effects and transitions that are important in keeping the user engaged. This means developers will be able to take the amazing changes in the Web for granted and start focusing on a flawless experience for the users. It is going to be an exciting time for anyone involved in building the new Web, because the interfaces are finally catching up with the content.”

The past year has proven Ryan right, with Adobe and Microsoft duking it out with RIA technologies. And there’s a lot more innovation to happen yet, so in 10 years time I can’t wait to see what the lay of the RIA land is!

9. International Web

As of 2007, the US is still the major market in the Web. But in 10 years time, things might be very different. China is often touted as a growth market, but other countries with big populations will also grow – India and African nations for example.

For most web 2.0 apps and websites (R/WW included), the US market makes up over 50% of their users. Indeed, comScore reported in November 2006 that 3/4 of traffic to top websites is international. comScore said that 14 of the top 25 US Web properties now attract more visitors from outside the US than from within. That includes the top 5 US properties – Yahoo! Sites, Time Warner Network, Microsoft, Google Sites, and eBay.

However, it is still early days and the revenues are not big in international markets at this point. In 10 years time, revenue will probably be flowing from the International Web.

10. Personalization

Personalization has been a strong theme in 2007, particularly with Google. Indeed Read/WriteWeb did a feature week on Personalizing Google. But you can see this trend play out among a lot of web 2.0 startups and companies – from last.fm to MyStrands to Yahoo homepage and more.

What can we expect over the next decade? Recently we asked Sep Kamvar, Lead Software Engineer for Personalization at Google, whether there will be a ‘Personal PageRank’ system in the future. He replied:

“We have various levels of personalization. For those who are signed up for Web History, we have the deepest personalization, but even for those who are not signed up for Web History, we personalize your results based on what country you are searching from. As we move forward, personalization will continue to be a gradient; the more you share with Google, the more tailored your results will be.”

If nothing else, it’ll be fascinating to track how Google uses personalization over the coming years – and how it deals with the privacy issues.

Conclusion

We’ve covered a lot of ground in this post, so tell us know what you think of our predictions. What other Web trends do you forsee over the next decade?

2008 Web buzz words

valleyventure — Wed, 12 Mar 2008 06:11:27 +0000

Blackshaw
Columns
E-mail
Biography–>

The Official 2008 Web 2.0 Buzzword Forecast

By Pete Blackshaw, The ClickZ Network, Dec 11, 2007
Columns | Contact Pete | Subscribe Biography–>

New currents beget new buzzwords. In 2008, the “conversation” will certainly march on, but I’ll put myself out on a limb and predict we’ll see more than a little correction and a reality check on our sometimes overly romantic exuberance over Web 2.0.

Realistically, getting it right with consumers in the age of consumer control is no cakewalk. Facebook (of all sites) is learning this the hard way with the Beacon backlash, and Unilever Dove’s campaign is experiencing it via elevated transparency around the perceived discontinuity between Onslaught-centered self-esteem messaging for women and edgy Axe-brand messaging targeted at men.

Next year, we may well find troubleshooting our brands is as big a deal as promoting our brands (this is a big theme in my upcoming book, “Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000“). In that spirit, I humbly offer my 2008 buzzword and buzz-phrase forecast:

“Search moptimization”: Yes, that’s “mop,” as in to clean up. This is the increasingly common, if not essential, brand practice of attempting to clean up negative search results against general or specific brand-related queries. For many brands, particularly in the consumer electronics category, hostile CGM (define) is beginning to fill, even dominate, the organic search shelf, a zone that we all know has an unmistakable impact on the awareness and trial of new products. For many brands, the mopping process can take two to three years (often longer) and heavily depends on operational and product, rather than marketing, decisions. Dell, for example, still has lots of “search moptimization” to clean up Jeff Jarvis’s two-year-old mess, though it’s worth noting its customer service blog and IdeaStorm initiatives have already helped mop up or reroute some of the venom.

“Wombagging”: This exercise tries to protect, or sandbag, your brand from negative or undesirable word of mouth (WOM). This could include anything everything from buying negative keywords on search engines to putting videos on your Web site featuring your CEO begging for patience and forgiveness. For some companies, wombagging might even include employing staffers in defense of bad buzz. But again, all this falls into the defensive branding arena, not outright promotion.

“Friendiligence”: This will become very popular in 2008. It involves the extra layer of due diligence on friend requests on Facebook, MySpace, and all the me-too social networks popping up here and there. Friendiligence will also dial up as marketers oversaturate the social networking space with fan sites and more. Is this a real friend offer, or is it spam? Trust me, we’ll all ask harder questions, and some friend lists will start to shrink.

“Converstations”: Brands now have multiple entry points for meaningful dialogues or conversations with consumers. These are essentially converstations. Brands fully immersed in CGM or social media may have dozens of conversations, from the consumer affairs interfaces and toll-free numbers to the corporate blog. They all matter, and every brand manager should know his or her converstations.

“Social mediation”: This is the process of rethinking or renegotiating certain advertising, marketing, and communications practices as a result of user backlash. What took place with the Facebook privacy backlash was essentially social mediation, and Facebook’s own groups served as the third-party arbitrator between disgruntled users and Facebook (the company and policymaker).

“We-bargaining”: A close cousin of social mediation, this is a bit more centered on brands and companies seeking peace, appeasement, or a lesser sentence with consumers when they screw up (particularly with viral, WOM, or CGM campaigns). It’s a tough exercise, because it typically pits a brand against the wisdom of the crowds. Richard Edelman did a very good job of we-bargaining after the controversial Wal-Mart blog incident last year. He was open, forthright, contrite, and resolved to fix the issue.. So, too, was the CEO of JetBlue when he posted his apology to YouTube.

“Greenlashing”: Woe to the marketer who over-claims or over-promises benefits on the green front. The market’s just too transparent. Sites like TreeHugger, now owned by Discovery, are part of mainstream consciousness these days, and smaller green skeptics will vet out a green imposter faster than you can say “carbon neutral.” As the number of do-good green blogs increases, you can expect even more greenlashing about brand missteps in this area. Mya Frazier of Ad Age deserves credit for firing the first big warning shot against marketers’ bows on what she calls “greenwashing.”

“Shamsparency”: Don’t get busted buying shills or engaging in unsavory activity. Just don’t do it, or the forces of shamsparency will catch up with you. It happens all the time, and firms in the CGM monitoring space (like my own) make it easier to uncover the imposters. My recommendation: avoid this term at all costs, and write the WOMMA ethics code on the whiteboard 30 times.

“Credlining”: Credlining is when consumers sift the good from the bad, the credible from the discreditable, and publish a scorecard accordingly. When protesters of Facebook’s Beacon feed effort started posting lists of Facebook’s advertising partners, credlining was in play.

“Facelifting”: This is the process of taking a hard look at traditional conversational touch points (“contact us” pages, feedback forms, surveys), and slapping on a friendlier, more empowering face that the usual run-at-all-cost one. Brands must think harder about the sincerity and believability of the invitation. How do you make consumers feel important and valued?

“Blog groveling”: This is the already-getting-old process of sucking up to bloggers and key influencers to try, test, or sample your new product or service. Usually it involves hokey headlines, repetitive phrases, and an unmistakable hint of desperation.

“World War 2.0″: Face it, the battle lines are calcifying around Web 2.0. Ambiguity reins supreme on “Who owns the conversation?” and “Who owns the influencer?” Sure, we all talk a mean game of cross-functional harmony, but war’s already erupting between the brand and IT departments, the PR agency and the digital agency, and, most important, consumer affairs and everyone else. Did I forget to mention legal? Top executives, meanwhile, fancy pitting one against the other in the impatient name of just getting it done. Expect to hear much more about World War 2.0 in 2008.

“MicroTubing”: This is what’s happening in TV and video development. New content forms are proliferating and appealing to smaller audiences. Small publishers, even mom-and-pop players, will continue to make inroads into the video publishing zone, many getting snatched up by brands and publishers for ongoing content.

“Lipsmacking”: This is process of talking trash about brands, services, or goods, usually with a digital trail.

The top ten marketing trends for 2008

valleyventure — Wed, 12 Mar 2008 05:29:33 +0000

Time to go green
A “green” plan is no longer a luxury, or an option. Every day, another
venerable brand commits to a sustainable future. While there is much
“green washing”, rating services such as B Corporation
will set standards that will have major companies fighting to prove
their greenness. Expect to find a new seat being formed in the
boardroom: Chief Green Officer (CGO).
Ads in the great outdoors
This year’s surprise was the rebound of out-of-home advertising,
growing faster than any channel except the internet. Outdoor reinvented
itself as a technology-rich means of engaging, entertaining and
educating commuters. Mini Cooper tested RFID-activated billboards with
personalised messages aimed at Mini drivers, a customised approach that
linked old (outdoor) with new (online) transforming an integrated media
platform into a cult-building club. So called “narrowcasting” video
networks continue to sprout, enabling marketers to put their messages
in front of selective targets – from health clubbers, to deli shoppers,
movie-goers and pet owners to elevator riders. Innovations like these
will drive out-of-home advertising to new heights.
Getting in on the game
Gaming now permeates just about all of society, creating fresh ways for
marketers to connect. Millions of non-golfers are swinging virtual
clubs as Nintendo’s Wii transformed video games. Senior citizen centres
bought Wiis to entertain guests and connect with grandkids. MTV
invested US$500 million in online games, on top of the millions it
spent for AddictingGames. Even B2B marketers will be smart to give
gaming a fresh look while blending in messaging, training or recruiting.
Mobile: I can hear you now!
This may be the year in which mobile deserves a closer look as
technology improvements create new opportunities. Bluetooth-enabled
phones have made it easier for marketers to provide contextually
relevant information; the Air Force set up Bluetooth transmitters at
racetracks to reach potential recruits. Apple’s iPhone partnered with
Google and Yahoo to enable ad-supported programming. Cellfire enlisted
a million people to receive coupons for anything from burgers to
videos. Mobile marketing can deliver highly personalised, and useful,
information when and where needed and as long as marketers don’t spam,
mobile marketing may be the missing link in personalised communications.
Join the club
Wise marketers will capitalise on the growing appeal of social
networks. Besides the obvious market leaders (MySpace and Facebook),
social networks exist in niches from teens (e.g. Pizco and Tagged) to
seniors (e.g. Eons) to photographers (e.g. Flickr), do-gooders (e.g.
AllDayBuffet) and even B2B (e.g. LinkedIn and Plaxo). This list is
almost endless. Chase’s partnership with Facebook has helped make its
“+1″ credit card the card of choice among college students. Marketers
will be smart to create a social network, or take an existing one and
make it physical (for example, Second Life held its first offline
convention in 2007).
Rise of the widget
Mini software applications (known as “widgets”) can provide
unprecedented access to hard-to-reach targets, as Facebook and MySpace
can attest. Even Microsoft’s Windows Vista supports user-written
widgets natively. According to ComScore, some 220+ million consumers
were using widgets as of May 2007. For example, iLike, which allows
Facebook users to share iTunes playlists, grew to over 10 million users
in only 10 months. Slide, which creates slideshows and embeds them in
social network homepages, claims to be the largest personal media
network in the world, reaching 120 million viewers monthly. That’s just
the beginning of the widget avalanche.
Roll the video
With 70% or more in broadband penetration in the US, streaming video is
a “must” marketing tool. eMarketer reported that 123 million Americans
watch a video at least monthly, and three-quarters tell a friend about
them. Whether a B2B or B2C marketer, video is an enormous opportunity
to engage, educate and entertain (those being the new “Three Es” of
successful marketing). Lots of brands are producing instructional
videos to help customers install or use their product or service.
Others create pure entertainment, hoping to build brand affinity or
drive traffic. But the ubiquity of video is not without its challenges:
With 7 million hours of video online, getting through to the right
consumers requires high quality storytelling and judicious editing.
From behavioural to contextual
Marketers will add behavioural targeting to their contextual search
efforts. AOL believes in the future of behavioural targeting, having
spent some US$275 million on Tacoda Systems, which claims to reach 120
million people in 31 discrete audience segments each month. eMarketer
predicted that behavioural targeting will increase ten-fold over the
next five years, growing from US$350 million to US$3.8 billion in
advertising spend. A test that Renegade ran for Panasonic yielded 50%
more imminent buyers of a particular consumer electronics product,
making it far better than a simple search-driven strategy.
Focus on the experience
The need to focus on integrated marketing approaches is not new, but
what will be new next year is how brand experiences will move to the
top of the integration priorities list, becoming the driving force of
marketing communications. Events and online initiatives were once
treated as below-the-line after thoughts, but marketers increasingly
realise that interactive brand experiences can be far more effective
than advertising and should be the starting point of a customer
conversation.
Marketing as a service
For years, marketers have been more concerned with what they say than
what their target hears, resulting in seemingly endless monologues.
Those marketers who continually support their customers, providing
actual value through each communication, will be the most successful in
2008. The value exchange can take many forms, but only if the marketer
understands the needs and aspirations of the customer – and then
commits to a genuine dialogue at every point of contact. The HSBC
BankCab, which provides free rides to HSBC customers in New York City,
is one example of marketing as service, transforming customers into
brand evangelists with every free ride. Marketers who treat marketing
as a service and deliver real value to customers and prospects alike
will undoubtedly triumph.

Gartner Identifies the Top 10 Strategic Technologies for 2008

valleyventure — Wed, 12 Mar 2008 05:27:00 +0000

Gartner Identifies the Top 10 Strategic Technologies for 2008

Analysts Examine Latest Industry Trends During Gartner Symposium/ITxpo, October 7-12, in Orlando

STAMFORD, Conn., October 9, 2007 — Gartner, Inc. analysts today highlighted the top 10 technologies and trends that will be strategic for most organizations. The analysts presented their findings during Gartner Symposium/ITxpo, being held here through October 12.

Gartner defines a strategic technology as one with the potential for significant impact on the enterprise in the next three years. Factors that denote significant impact include a high potential for disruption to IT or the business, the need for a major dollar investment, or the risk of being late to adopt.

“Companies should factor these technologies into their strategic planning process by asking key questions and making deliberate decisions about them during the next two years,” said David Cearley, vice president and distinguished analyst at Gartner. “Sometimes the decision will be to do nothing with a particular technology. In other cases it will be to continue investing in the technology at the current rate. In still other cases, the decision may be to test/pilot or more aggressively adopt/deploy the technology. The important thing is to ask the question and proactively plan.”

The top 10 strategic technologies for 2008 include:

Green IT. The focus of Green IT that came to the forefront in 2007 will accelerate and expand in 2008. Consider potential regulations and have alternative plans for data center and capacity growth. Regulations are multiplying and have the potential to seriously constrain companies in building data centers, as the impact on power grids, carbon emissions from increased use and other environmental impacts are under scrutiny. Some companies are emphasizing their social responsibility behavior, which might result in vendor preferences and policies that affect IT decisions. Scheduling decisions for workloads on servers will begin to consider power efficiency as a key placement attribute.

Unified Communications. Today, 20 percent of the installed base with PBX has migrated to IP telephony, but more than 80 percent are already doing trials of some form. Gartner analysts expect the next three years to be the point at which the majority of companies implement this, the first major change in voice communications since the digital PBX and cellular phone changes in the 1970s and 1980s.

Business Process Modeling. Top-level process services must be defined jointly by a set of roles (which include enterprise architects, senior developers, process architects and/or process analysts). Some of those roles sit in a service oriented architecture center of excellence, some in a process center of excellence and some in both. The strategic imperative for 2008 is to bring these groups together. Gartner expects BPM suites to fill a critical role as a compliment to SOA development.

Metadata Management. Through 2010, organizations implementing both customer data integration and product integration and product information management will link these master data management initiatives as part of an overall enterprise information management (EIM) strategy. Metadata management is a critical part of a company’s information infrastructure. It enables optimization, abstraction and semantic reconciliation of metadata to support reuse, consistency, integrity and shareability. Metadata management also extends into SOA projects with service registries and application development repositories. Metadata also plays a role in operations management with CMDB initiatives.

Virtualization 2.0. Virtualization technologies can improve IT resource utilization and increase the flexibility needed to adapt to changing requirements and workloads. However, by themselves, virtualization technologies are simply enablers that help broader improvements in infrastructure cost reduction, flexibility and resiliency. With the addition of automation technologies – with service-level, policy-based active management – resource efficiency can improve dramatically, flexibility can become automatic based on requirements, and services can be managed holistically, ensuring high levels of resiliency. Virtualization plus service-level, policy-based automation constitutes an RTI.

Mashup & Composite Apps. By 2010, Web mashups will be the dominant model (80 percent) for the creation of composite enterprise applications. Mashup technologies will evolve significantly over the next five years, and application leaders must take this evolution into account when evaluating the impact of mashups and in formulating an enterprise mashup strategy.

Web Platform & WOA. Software as a service (SaaS) is becoming a viable option in more markets and companies must evaluate where service based delivery may provide value in 2008-2010. Meanwhile Web platforms are emerging which provide service-based access to infrastructure services, information, applications, and business processes through Web based “cloud computing” environments. Companies must also look beyond SaaS to examine how Web platforms will impact their business in 3-5 years.

Computing Fabric. A computing fabric is the evolution of server design beyond the interim stage, blade servers, that exists today. The next step in this progression is the introduction of technology to allow several blades to be merged operationally over the fabric, operating as a larger single system image that is the sum of the components from those blades. The fabric-based server of the future will treat memory, processors, and I/O cards as components in a pool, combining and recombining them into particular arrangements to suits the owner’s needs. For example a large server can be created by combining 32 processors and a number of memory modules from the pool, operating together over the fabric to appear to an operating system as a single fixed server.

Real World Web. The term “real world Web” is informal, referring to places where information from the Web is applied to the particular location, activity or context in the real world. It is intended to augment the reality that a user faces, not to replace it as in virtual worlds. It is used in real-time based on the real world situation, not prepared in advance for consumption at specific times or researched after the events have occurred. For example in navigation, a printed list of directions from the Web do not react to changes, but a GPS navigation unit provides real-time directions that react to events and movements; the latter case is akin to the real-world Web of augmented reality. Now is the time to seek out new applications, new revenue streams and improvements to business process that can come from augmenting the world at the right time, place or situation.

Social Software. Through 2010, the enterprise Web 2.0 product environment will experience considerable flux with continued product innovation and new entrants, including start-ups, large vendors and traditional collaboration vendors. Expect significant consolidation as competitors strive to deliver robust Web 2.0 offerings to the enterprise. Nevertheless social software technologies will increasingly be brought into the enterprise to augment traditional collaboration.

“These 10 opportunities should be considered in conjunction with many proven, fully-matured technologies, as we as others that did not make this list, but can provide value for many companies,” said Carl Claunch, vice president and distinguished analyst at Gartner. “For example, real-time enterprises providing advanced devices for a mobile workforce will consider next-generation smartphones to be a key technology, in addition to the value that this list might offer.”

Tap McKinsey’s Brains for Your 2008 B-Plan

valleyventure — Wed, 12 Mar 2008 05:25:49 +0000

Tap McKinsey’s Brains for Your 2008 B-Plan

We like The McKinsey Quarterly, and today three of its consultants published a report on eight emerging technology trends they think will shape markets and economic growth in the coming year(s). These trends ought to inform your next business plan – or any new initiatives you’re considering for your current startups.We’ve compressed the lengthy report for your reference. Read the full text here. (Audio download is also available.) With each trend, McKinsey offers a caution. Pay attention to these. The second half of our post is a comprehensive list of the authors’ “further reading” resources. Paste it on your wall.

The authors begin…

Technology alone is rarely the key to unlocking economic value: companies create real wealth when they combine technology with new ways of doing business. … we have identified eight technology-enabled trends that will help shape businesses and the economy in coming years. These trends fall within three broad areas of business activity: managing relationships, managing capital and assets, and leveraging information in new ways.

A. Managing relationships1. Distributing cocreation

The Internet and related technologies … allow companies to delegate substantial control to outsiders—cocreation—in essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

The Caution:
Companies pursuing this trend will have less control over innovation and the intellectual property that goes with it, however. They will also have to compete for the attention and time of the best and most capable contributors.

2. Using consumers as innovators

Consumers also cocreate with companies; the online encyclopedia Wikipedia, for instance… Companies that involve customers in design, testing, marketing (such as viral marketing), and the after-sales process get better insights into customer needs and behavior and may be able to cut the cost of acquiring customers, engender greater loyalty, and speed up development cycles.

The Caution:
But a company open to allowing customers to help it innovate must ensure that it isn’t unduly influenced by information gleaned from a vocal minority. It must also be wary of focusing on the immediate rather than longer-range needs of customers and be careful to avoid raising and then failing to meet their expectations.

3. Tapping into a world of talent

… Much as technology permits [companies] to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks…new talent-deployment models could emerge [and] changes in the nature of labor relationships could lead to new pricing models that would shift payment schemes from time and materials to compensation for results.

The Caution:
This trend should gather steam in sectors such as software, health care delivery, professional services, and real estate, where companies can easily segment work into discrete tasks for independent contractors and then reaggregate it … Competitive advantage will shift to companies that can master the art of breaking down and recomposing tasks.

4. Extracting more value from interactions

Companies have been automating or offshoring an increasing proportion of their production and manufacturing (transformational) activities and their clerical or simple rule-based (transactional) activities. As a result, a growing proportion of the labor force in developed economies engages primarily in work that involves negotiations and conversations, knowledge, judgment, and ad hoc collaboration—tacit interactions, as we call them. By 2015 we expect employment in jobs primarily involving such interactions to account for about 44 percent of total US employment, up from 40 percent today.

The Caution:
Tere is still substantial room for automating transactional activities, and the payoff can typically be realized much more quickly and measured much more clearly than the payoff from investments to make tacit work more effective. Creating the business case for investing in interactions will be challenging—but critical—for managers.

B. Managing capital and assets

5. Expanding automation

Companies, governments, and other organizations have put in place systems to automate tasks and processes [like] forecasting and supply chain technologies…. Now these systems are becoming interconnected through common standards for exchanging data and … this information can be combined in new ways to automate an increasing array of broader activities, from inventory management to customer service.

The Caution:
Automation is a good investment if it not only lowers costs but also helps users to get what they want more quickly and easily, though it may not be a good idea if it gives them unpleasant experiences. The trick is to strike the right balance between raising margins and making customers happy.

6. Unbundling production from delivery

Technology helps companies to utilize fixed assets more efficiently… Information and communications technologies handle the tracking and metering critical to the new models and make it possible to have effective allocation and capacity-planning systems. Amazon.com [has] expanded its business model to let other retailers use its logistics and distribution services [and] independent software developers … buy processing power on its IT infrastructure so that they don’t have to buy their own. Mobile virtual-network operators, another example of this trend, provide wireless services without investing in a network infrastructure.

The Caution:
Companies that make their assets available for internal and external use will need to manage conflicts if demand exceeds supply. A competitive advantage through scale may be hard to maintain when many players, large and small, have equal access to resources at low marginal costs.

C. Leveraging information

7. Putting more science into management

Technology is helping managers exploit ever-greater amounts of data to make smarter decisions and develop the insights that create competitive advantages and new business models. From “ideagoras” (eBay-like marketplaces for ideas) to predictive markets to performance-management approaches… Leading players are exploiting this information explosion with a diverse set of management techniques. Google fosters innovation through an internal market: employees submit ideas, and other employees decide if an idea is worth pursuing or if they would be willing to work on it full-time.

The Caution:
Leaders should get out ahead of this trend to ensure that information makes organizations more rather than less effective. Information is often power; broadening access and increasing transparency will inevitably influence organizational politics and power structures. Environments that celebrate making choices on a factual basis must beware of analysis paralysis.

8. Making businesses from information

Accumulated pools of data captured in a number of systems within large organizations or pulled together from many points of origin on the Web are the raw material for new information-based business opportunities… market imperfections include[ing] information asymmetries and the frequent inability of decision makers to get all the relevant data … allow middlemen and players with more and better information to extract higher [prices] by aggregating and creating businesses around it.

The Caution:
But that sword can cut both ways; today’s aggregators, for instance, may themselves be aggregated tomorrow. Companies relying on information-based market imperfections need to assess the impact of the new transparency levels that are continually opening up in today’s information economy.

McKinsey’s authors are: James Manyika, a director, and Kara Sprague, who is a consultant in McKinsey’s San Francisco office; and Roger Roberts, who is a principal in the Silicon Valley office.

FURTHER READING:
A. Managing relationships

Yochai Benkler, The Wealth of Networks: How Social Production Transforms Markets and Freedom.
Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology.
James Surowiecki, The Wisdom of Crowds.
Eric von Hippel, Democratizing Innovation
C. K. Prahalad and Venkat Ramaswamy, The Future of Competition: Co-Creating Unique Value with Customers.
Don Tapscott and Anthony D. Williams, Wikinomics: How Mass Collaboration Changes Everything.
Richard Florida, The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community, and Everyday Life.
Daniel H. Pink, Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live.
Bradford C. Johnson, James M. Manyika, and Lareina A. Yee, “The next revolution in interactions,” mckinseyquarterly.com, November 2005.
Scott C. Beardsley, Bradford C. Johnson, and James M. Manyika, “Competitive advantage from better interactions,” mckinseyquarterly.com, May 2006.
Thomas W. Malone, The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life.

B. Managing capital and assets

John Hagel III, Out of the Box: Strategies for Achieving Profits Today and Growth Tomorrow through Web Services.
Claus Heinrich, RFID and Beyond: Growing Your Business with Real World Awareness.
Jeanne W. Ross, Peter Weill, and David C. Robertson, Enterprise Architecture as Strategy: Creating a Foundation for Business Execution.
“Jeff Bezos’ risky bet,” BusinessWeek, November 13, 2006.

C. Leveraging information

Thomas H. Davenport and Jeanne G. Harris, Competing on Analytics: The New Science of Winning.
John Riedl and Joseph Konstan with Eric Vrooman, Word of Mouse: The Marketing Power of Collaborative Filtering.
Stefan H. Thomke, Experimentation Matters: Unlocking the Potential of New Technologies for Innovation.
David Weinberger, Everything Is Miscellaneous: The Power of the New Digital Disorder.
Hal R. Varian, Joseph Farrell, and Carl Shapiro, The Economics of Information Technology: An Introduction.
Carl Shapiro and Hal R. Varian, Informatio

U.S. tech trends for 2008

valleyventure — Wed, 12 Mar 2008 05:19:06 +0000

U.S. tech trends for 2008

Bernard Moon | December 20th, 2007 | 24 Comments

[Editor’s note: This is an Op-Ed piece by Bernard Moon, an entrepreneur who blogs at Silicon Moon. It’s time to hear from an entrepreneur, as we’ve already heard from the VCs; see here and here.]

A couple of months ago, my wife and I visited Seoul, South Korea—a trip that inspired me to come up with a list of technology predictions for 2008 and beyond. The land that brought us bottle service, massive multiplayer online role playing, and paid online casual gaming serves as a good place to consider emerging trends—not just technologies that are on their way to the U.S. but also those the U.S. will export to the rest of the world. Here are a few predictions of what I see lurking on the immediate and not-so-immediate technology horizon.

Mobile videoconferencing reaches the states. If you’re a teen, the only thing better than gabbing on your cell with a friend is gabbing on your cell with a bunch of friends—and seeing each of them on screen as you do so. In Korea kids are doing just this—videoconferencing as they speak to friends via mobile handsets—and loving it. Since kids are kids everywhere, we can expect to see a similar response in the United States, though we probably won’t see it happen before the end of 2008. Unlike Korea—which has the only commercial WiMAX networks in the world—the United States doesn’t have the Mobile WiMAX capabilities required to stream video at 8 megabits per second or greater (16 Mbps or greater for downloads). In the U.S., you’re lucky if your cable modem service gets 6 Mbps—and a range of 2 Mbps to 4 Mbps is far more typical. When mobile videoconferencing does become a reality here, how will it impact handset manufacturers? Can we expect to see larger mobile phones and bigger screens as a result? Only time will tell.

Virtual currencies warm up. Content is not the only driver for sustainable online communities; virtual economics play an important role as well, with virtual currency serving as an increasingly critical tool. Virtual goods already provide a viable business model in online worlds—with companies providing outlets in which players can convert in-game assets into real-world wealth (and vice-versa). Virtual goods are starting to find their way into every other area of the Net as well—only now it’s not just about generating revenue but about paying people (in virtual currency) for their eyeballs. Virtual currency is already used to grab users’ attention for online product launches and games and could soon become a common feature in all online networks and worlds. As companies and services vie for user attention, we can expect to see more and more of them rewarding users with virtual coins or points that can be traded for cash or noncash goods and services. Worst-case scenario, we all turn into brain-dead mouse clickers obsessed with accumulating Yelp and Starwood points. Best-case scenario, we’re rewarded for our time and effort with healthy incentives.

Semantic Web slowly begins to gel. Tim Berners-Lee’s vision of the Web of the future—in which data itself becomes part of the Web and can be processed independently of application, platform, or domain—is finally becoming a reality … albeit slowly. In 2008 we can expect the various filtering, aggregating, and grouping efforts to continue as the Web 2.0 services that initially captured our attention (such as Radar Networks and Adaptive Blue) expand and evolve. Now the questions become, how will data be organized? By advanced algorithms? By humans (no, not Mahalo)? And what format or tools will be used? Tagging? Grouping? Finally, what do users want? Friends’ feeds? Multimedia files? The latest books, photos, and gossip on Britney Spears? I believe we’ll see a couple of tangible and useful services take off next year (including some of the stealth startups I’ll be writing about soon).

Location-based mobile services gain ground. According to Morgan Stanley analyst Mary Meeker, 20 percent of mobile phones currently include the satellite-based navigation system Global Positioning System (GPS)—a number that’s expected to grow to 50 percent within five years. This means that at last a critical mass of end users has emerged for location-based mobile services that take advantage of GPS. Thus, we can expect to see a surge of activity in this area. I can visualize it already—my weight soaring as In-N-Out pushes me a coupon every time I get within proximity of an outlet, my credit card bills soaring as Nordstrom and Macy’s send my wife sales notices and coupons. It will be horrible; I’ll be dragged to these places more often. Forget it! I hate location-based services already!

Interactive TV makes a comeback. This won’t be like watching Evander Holyfield or Mike Tyson attempting a comeback—a one-time champ too old and worn out to rise to prominence again. Instead, it will be more like watching a boxer who debuted too early return and live up to his initial promise. This time around the infrastructure is actually cost-effective; the integration of the Internet and TV has created infinite collaborative possibilities; and new entrants (such as consumer electronics makers) are eyeing the market. Interactive TV won’t be a media champ; however, it will serve as an important secondary source for information, commerce, and social networking. Efforts such as Apple TV (which combines Internet content and television) represent the first step in Internet content being ported to millions of U.S. couch potatoes. With consumer electronics manufacturers eager to capture more of their customers’ mindshare, this represents a potential battleground for cable and satellite operators.

Watch for the trends I’ve spotlighted here to emerge in 2008 and beyond—and let me know what technology trends you see on the horizon.