If you’re an investor in Apple or just one of the many admirers of this iconic business, you may be closely following news about the health of Steve Jobs.  The cliché that people are a company’s greatest asset was literally demonstrated as this news surfaced — AAPL lost 5.7% of its value after his medical leave was announced.  Is this the beginning of the end for the company or just a period of transition during a time of continued leadership?  An opinion on the matter is vital to investors - should you be buying on unnecessary weakness or be gradually reducing your exposure?   To develop an informed opinion you’re going to have to do some diligence.

I’m going to offer an approach toward diligence that uses web connections to define key topics for your assessment.  Web connections are links between a story you’re following and the endless number of topics that exist in the world.  It may sound quite broad and unwieldy but there is a manageable structure we can put around the information possibilities.

Web connections allow us to explore these topics by the degree of their relatedness.  Think of it as swinging from vine to vine in a jungle of information.  You can build upon a topic of interest by knowing what else is connected to it rather than limit exploration by direct coverage of what you’re reading.”

What’s useful about these connections is they transcend the obvious information you will find collected in most articles or coverage about a story you’re following.   As I’ll explain later on, that’s not a knock on reporters but instead a natural limitation of what’s possible for any writer to cover in a single story.  Put another way, web connections extend our journey into and behind the story.

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They sent Yankee Stadium off with a great tribute to the team, it’s players and legacy. The greatest sports franchise of the 20th century - the Yankees - saying goodbye to the Cathedral they’ve called home for over 85 years. Why can’t a corporation evoke loyalty and following like a sports team? There are many great companies with a history of performance and amazing achievement. People drive this success. No doubt it’s hard to compare the glamour of sports achievements (e.g., clutch homeruns) with making big things happen in business. Knowledge work is not very visible and rarely public. But let’s not under-estimate the strong appeal and mystique of accomplishments in industry related to inventions, patents, product ideas, customer insights, sales, deals, etc.

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• Farewell to the Cathedral
• Massive Legacy and an Emotional Ending
• It's Gone! Goodbye!

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I attended the Web 2.0 Expo last week, where Jonathan Zittrain spoke about his latest book – The Future of the Internet and How to Stop It. It’s a big idea about the future of tech with constitutional implications.

The book is focused on the form the web takes as a computing platform with increasingly centralized characteristics. Zittrain believes the current trajectory of the web has the potential to spawn a network of control that has major societal and political impact. He believes centralization in the form of cloud computing is a natural outgrowth of increased human reliance on computing coupled with the risk of things like viruses and security threats. Centralized services clearly help users protect themselves in the wild world of “tethered” computing. Users will prefer the benefits centralized information services against having to manage these services on their own, which would be required under “localized” (client-based) approaches. To simplify the point, think about installing anti-virus software on computers. If your services are in the cloud, then securing those services becomes someone else’s problem. The pull to tether every variant of computing is so significant, that people will crave the stability of centralization. This entrusts the livelihoods of users to the giant e-sponge in the sky that someone else controls.

Reliance carries two principal implications. First, it furthers lock-down potential, which is the ability of a service provider to dictate rules of engagement for users and the technology ecosystem. That in turn stymies innovation. Second, lock down introduces opportunity for regulation that favors government over the individual. This introduces the potential for violations of privacy and liberty. Zittrain provides several current examples of these violations.

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• Future of the Internet Site
• A Safe but Sterile Internet
• Lessig & Zittrain Talk
• Zittrain Bio
• Related Book - Network Power

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The NY Times was in the news yesterday – this time, a docile development related to its web site leadership. The Times was nominated for several Webby awards. In fact, the company has the largest presence of any organization with nine nominations, including the following categories: Best Visual Design, News, Newspaper, Best Copy and Best Practices.

Good news is a welcome relief at The Times. The “nation’s paper” is no stranger to front-page storylines. It is the center of several dramatic circumstances that involve controversy over future business direction. In a quick recap, there’s been shareholder discord over share price performance, governance structure (dual-class stock) and future strategy in response to the quickly vanishing newspaper business model. These issues are inter-related because different groups (broadly management vs. shareholders) hold different views on how the address the current industry climate and whether the corporate structure needs to be amended to respond decisively and effectively. Recently, hedge funds were successful in securing two seats on the company’s Board through a settlement with management.

With traditional offline revenue declining at a steady pace (January print revenues were down 9.8%), the foreseeable future does not look promising for overall financial performance. But is there light? In other words, as the core declines, how quickly is the revenue loss replaced by the digital business? Clearly this is a question of rates of change. Currently, the company does about $750mm a quarter in total revenue and about 90% is print. If the digital base, which is about $85mm per quarter, continues to grow at 15% annually while the core continues to decline at 10% annually, online will overtake offline 9 years from now. Can you say web 4.0? Even at 20% online revenue growth, we’re talking about 7.5 years for equivalency. Certainly a long way off and sufficient cause for shareholder anxiety.

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• 12th Annual Webby Award Nominees
• NY Times CEO - Bear Stearns 21st Annual Media Conference
• Shareholder Dissent Peaked Last Year
• Newspaper publishers skid painfully into 2008
• Michael Wolf on the The Times
• Boards Give Up Taming Act

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There are a number of tools available on the web that will take your documents and analyze the contents statistically to help you identify patterns. For the investment community, these technologies are not quite ready for prime time. In other words, the potential to glean insights is hit-or-miss. But, I’ve been impressed with a tool launched a year ago by IBM (IBM) called Many Eyes which does some simple stats on document contents and provides the output in various forms. Many Eyes is a visualization tool for data focused on natural language. When the data is words, as in a lengthy 10K form, I begin to wonder if some processing of these words can tell us something we don’t already know.

I’ve taken the contents of Google’s (GOOG) 2007 10K and loaded it as a data set in the visualization tool. Do you think any meaningful insights can be derived? Here’s a summary of my results in this simple experiment.

First, I loaded the Product Section of the document, which lists and discusses about 35 products within Google’s consumer portfolio. Enterprise products (Google Apps, Google Appliance) are covered under a separate section. I excluded terms/words like “Google”, “users”, “web” and others that don’t inform the analysis.

Click here or the image below to see the visualization results.

Some themes that standout include (based on term-frequency):

=> Mobile
=> Maps
=> Gmail
=> Groups
=> News

Nothing here is a surprise, as these are all product categories where Google has a significant product in the market.

Some other terms that stood out to me are “free” and [user] “experience”, two central aspects of Google’s focus and way of doing business.

One valuable thing I learned from these results is the lack of product focus on web 2.0 trends and drivers. There’s not a major role for “social networking” themes like “syndication”, “tagging”, “sharing”, “commenting”, etc. across the product portfolio. Could this speak to weakness in product breadth? Where’s the web 2.0 lingo and product focus?

Next, I upload the Risk Factors section on the hopes it would reveal patterns related to Google’s concerns.

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• One Month Retro on IBM's Many Eyes App
• IBM Wants Many Eyes on Visualization
• IBM's Many Eyes Project Seeks Stats Freaks

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Microsoft or Google - what might be the Yahoo employee perspective? While guaranteed outcomes may trump the unknown for investors, a different logic seems to apply for Yahoo employees thus far. That’s understandable at this early stage of the process. It was assumed that Yahoo would occupy its current industry position for a long-time, fighting infinite rounds with Google. Being part of that battle within an independent Yahoo has carried a huge sense of purpose for employees. It’s only natural to want to see this set-up continue, especially since the web remains in its infancy and Yahoo is still the # 2 player. I’m not saying that the fight won’t continue as vigorously under new ownership. But it will be different.

The prevailing view on tradeoffs for employees has gone something like this — the ambiguity of a Google deal buys time and preserves the dream, whereas the Microsoft option brings certainty of the “not-so-fun” variety. I’m interested in opinions that dig into these assumptions and will offer ideas to kick-off that thread.

Teaming-up with Google on search buys independence but introduces unresolved issues about long-term positioning of the business. Yes, Yahoo would continue to operate an independent search product as well as it large web apps network such as email, jobs, movies, travel, personals, social bookmarking, photo sharing and finance, while better monetizing search through Google. That sounds great in theory because the only thing changing is that Google’s under the hood of search advertising. The user experience that we know as “Yahoo” would remain in-tact.

But two related issues surface as a result of such a partnership.

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• The Letter Where Yahoo Makes Its Case to Shareholders
• Will Yahoo Feel the Love?
• Yahoo Weighs Outsourcing Search Ads to Google
• Yahoo Partisans Go Online with Buyout Opinions
• Murdoch's News Corp Negotiating Alliance with Yahoo
• A Media Buyer's Perspective

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Ad Meter is a great cultural artifact which has been around for 20 years. It uses a live panel to record second by second sentiment about Super Bowl commercials. It works like this: 234 panelists use a device to continuously rate how they feel about ads in real time. An ad is given its highest average score at any point (second) in the length of the commercial by these panelists. I wonder why they take this approach (an ad with high highs and low lows can still win). Local avails are excluded from the eligibility for obvious reasons. Whatever you might feel about the method, it’s a uniquely fun and accessible diversion that is a loose gauge of the mainstream meme.

As you might guess, the highest rated ads are those which are most entertaining, tell a compelling story and engage the viewer. Like a show within a show. The top five from 2008:

Super Bowl commercials are the zenith of branding advertising venues and stand at the opposite end of the spectrum from search engine marketing. Of course both ends have a role and purpose in a marketing portfolio. Different spend allocations make sense depending upon the nature of a product category. In the SEM and direct response world, popularity and ratings are easy to measure - they’re measured in ad performance. That is ultimately revealed by cost of acquisition (COA).

But as brand advertising acquires some of the characteristics of direct marketing approaches such as SEM (and vice-versa), I’m left to wonder, is this the best we can do? I wonder why no one has disrupted the idea of Ad Meter (within a broader context).

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• Ad Meter 2008 Homepage from USA Today
• Full List of Ads and Performance
• Nielsen's Take on Ad Ranks
• Adweek's Super Bowl XLII Site
• Game 17 vs. Commercials 3
• Apple's 1984 Classic

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The new year brings some management changes at Cisco. Charlie Giancarlo recently retired from the company to join tech buyout firm, Silver Lake Partners. Charlie spent 14 years at Cisco and was most recently the Chief Development Officer, effectively the #2 executive and possible successor to CEO, John Chambers.

I had the pleasure of meeting Charlie for the first time during his going-away event, where he chatted openly and generously with the rank-and-file. A Cisco employee carrying an iPhone was kind enough to snap a picture for me.

From the Cisco press release:

I’ve been at Cisco for a few months, working as a consultant and advising on new market strategy. We’re looking at whitespaces that might be considered non-traditional for the company but which leverage my background in the web, software and digital media.

Another senior executive, Dave Leonard, also transitioned recently (to start a clean-tech business). Dave has been the General Manager and top dog running the company’s $5bn cash cow switching business unit. I’ve been working for Dave and his group. It goes without saying that Cisco’s ability to branch out and experiment into new markets is in part due to domination in switching. So, new things you find the company successful with (TelePresence, etc.) are tied to this core even while there remains lots of potential for these existing businesses to pioneer new spaces too.

This is my third large company experience (AOL and Goldman Sachs are the other two places I’ve spent time). I’ve always found it somewhat impossible for a big company to send off a long-time employee or major contributor (such as a senior executive) in the right way despite their best attempts. The farewells, thank you’s and recognition don’t quite reflect the humanity of what is essentially a parting of ways between people. Life meets reality.

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• Giancarlo to Leave Cisco
• Senior Executive Is Leaving Cisco Systems - NY Times

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Many large companies find themselves launching new businesses at unprecedented rates in an effort to maintain growth profiles, margins and leadership status. When a company pursues new markets, that can include a variety of corporate initiatives which are distinct from each other. At the highest level in terms of potential value creation is the process of vying for a new category. I call this category-creation or entry. Category-creation is different than finding a new market for an existing line of business.

In the latter case, an existing product or service is re-oriented from a positioning, capability and/or distribution standpoint beyond existing customer focus into distinct and additive customer groups. This can be a complex activity for an established business because success often leads to inertia. In other words, it’s hard but necessary to unlearn certain aspects of an existing success formula in order to make the business mix work for new sets of buyers. Expansion of existing products lines into new customer groups holds a lower risk profile than the pursuit of a new category because some aspects of these new markets leverage existing capability. But product line expansion to new segments also carries lower magnitude of order growth potential. Only truly new categories move the needle in breakout ways.

These two growth strategies are equally important — one should not exist without the other. But it’s far more likely that a company is proficient at market expansion than market creation and development. That’s why I’m going to share some thoughts on the category-creation process.

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• Reinventing innovation at consumer goods companies - McKinsey Quarterly;
• How companies approach innovation - A McKinsey Global Survey;
• The Granularity of Growth - McKinsey Quarterly

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Comcast has a fantastic marketing campaign these days that you’ve probably seen on television or billboards. Building on the “It’s Comcastic” theme, the company is having fun innovating on the English language in ways that speak to digital life.

This involves devising new buzz-phrases like “snurfing” (surfing the web instead of paying attention to your phone conversation) and “Wi-fiving” (instant messaging a friend to celebrate a specific part of a TV program) that represent a merging of different words into one. Comcast refers to it as triples language.

These buzz-phrases resonate with consumers because they speak to real scenarios that people now encounter in an era of digital living.

My favorite is an advertisement about “quizjacking” where a girl is watching a game show while her brother, sitting within earshot of the TV, is looking up answers to questions on his computer. He’s spitting out answers before she has a chance to take a guess.

Siblings annoying each other is always the basis of good humor and this example was sinisterly familiar. The big picture, of course, is Comcast demonstrating how television and Internet consumption go together in ways that are novel.

I think Comcast is touching the tip of the iceberg in this exercise of digitally inspired word-mashups. I’m no William Saffire, but I’d like to add a few of my own based on observations. Here’s one to start (and more down the line as ideas come to mind): SOFTSUMERISM.

Softsumerism —-> The cross-over influence of consumer applications on the design of enterprise technologies; innovation within enterprise systems addressing the convergence of personal and professional identity.

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• Comcast Triples Language Site
• Interview with Head of Google Analytics
• IBM Teams With Second Life To Build Portable Avatars
• CTIA: Microsoft Touts Convergence

Filed under: Google, Web Apps, Innovation, Enterprise Technology | No Comments »

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