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. Read more »

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

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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. Read more »

• 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. Read more »

• 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). Read more »

• 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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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. Read more »

• 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. Read more »

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

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Marc Andreessen recently wrote a useful post about web platforms. It’s a timely collection of thoughts that has spurred conversation amongst executives at several large technology companies, including Yahoo and Google, according to my sources. There’s a lot of ambiguity around this whole issue of platforms so I’m glad that Marc has taken the lead in throwing down a detailed perspective.

Part of the ambiguity stems from the fact that the word is totally hackneyed and over-played. What everyone seems to agree on is that in the distant future there will only be a few big IT companies – all of them with platforms at the core. Here we mean to say that current borders between layers of the technology stack – network, data center, web services, applications, etc. will fuse together to form platforms that challenge traditional lines. Understanding the nature of these platform opportunities, therefore, becomes an issue of survival. The issue has reach beyond traditional web companies, which are the focus of Marc’s ideas, affecting a spectrum of companies ranging from Cisco to IBM to Google. Read more »

• The Web is the Platform
• The Social Network Operating System
• Andreessen vs. Cisco: Web 2.0 platform competition heats up
• IBM Confirms: Google Poses NO Enterprise Threat

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So, is Facebook a media firm or a technology company? In case you don’t know, the conversation was spurred by Mark Zuckerberg’s comments at the iMeme event (held in SF during late June), which I attended. Mark takes the perspective that the company is in the technology business. This existential-like question is difficult to wrestle down, not only for Facebook but for the industry more broadly.

Facebook’s position on the matter is very timely, and somewhat predictable, since platform is the strategic mantra of the company now. In case you’ve been living on Mars for a while, Facebook is an engine gaining steam despite its existing scale by opening-up. It’s demonstrated the horsepower to haul the core social networking market but is gaining the strength to pull along all kinds of adjacent services. Under the hood, it’s a jumbo-jet. But the plane has many, many empty seats where applications can sit. These applications are, of course, best sourced from the market and third-parties. Facebook’s core has therefore become open to others to wrap around the social networking phenomenon. Powerful stuff. Keep in mind, not all platforms are alike….plenty of companies have developer programs but they’re offering more of a bus-ride, rickshaw experience or mini-jet seat, compared to Facebook’s Dreamliner. Playing enabler, the company has deduced, supports the notion that it fits “lower in the technology stack” than where media businesses reside. Read more »

• Facebook's Plan to Hook up the World
• Repeat After Mark: Facebook is Not a Media Company
• Facebook: “Not Media Business”
• The Best Facebook Apps
• The Race to Buy Facebook Apps
• Should Yahoo Try Again for Facebook

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Much of the dialogue about web content over the last few years has focused on the long-tail. That’s been for good reason – the idea was one of those mega-trends with rippling consequences. It came onto the scene in a big way because it nicely encapsulated many diverse developments in the media world. But along the way, we may have lost sight of it’s equally important cousin – mainstream content.

It’s true that mainstream is not what it used to be. But it’s still around – alive and kicking. In fact, you could say mainstream is bigger than ever. If you don’t think so, just consider the popularity of the Super Bowl, which has always been ubber but continues to grow in reach and cultural significance. Last season (2007), it was watched by over 141mm viewers versus 91mm in 1993. The 10 most-watched programs in TV history are all Super Bowls, according to the NFL. This in no way diminishes the advent of the long-tail, though it raises important questions about how these two cousins will get along and work with each other. Things may be in flux, but there’s no doubt they’re two pieces of the same puzzle.

Mainstream is anything that has universal appeal to consumers despite their differences. Differences in taste, preferences and affiliations. In a globalized world, mainstream content will grow not shrink in terms of audience. There will always be a common denominator that links people. In a frictionless medium like the web, where instantaneous diffusion is built into the system, anything that can capture global consciousness will have a field day.

It would be interesting to know how many things in the public consciousness have wide recall factor and whether this figure is growing. In other words, the number of items that enter into pop culture and how quickly. Safe to say that more things go mainstream and they get there faster? Of course, there’s no precise bar for mainstream. Something doesn’t have to be mainstream at the international level to qualify.

If mainstream is still big, then what’s changing about it? Read more »

• Wikipedia Page on Long Tail
• From Niches to Riches
• The Rise and Fall of the Hit

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I’m a sucker for analogies between sports and business. With Barry Bonds on the cusp of tying Hank Aaron’s homerun record, the issue of steroid usage is front and center in sports. That got me thinking about “performance enhancement” in the venture capital business. In other words, how do you transition from “safer” investment strategies to ones that provide more upside?

The suspicion of Barry Bonds has a lot to do with his transformation about ten years ago from an average power hitter to the most dominant power hitter of our generation. In his first ten years as a player, Bonds averaged more doubles than homeruns (31 compared to 29). During the next ten full-seasons, that ratio inverted sharply (28 compared to 44). In baseball, hitters possess different styles. Three common varieties are singles hitters, doubles-hitters and power-hitters. One is not necessarily better than the other (though prestige, compensation and star-value will vary widely). These styles of hitting are fundamentally different meaning that almost everything the hitter does to become proficient at the desired approach will have to be tailored. Pitch selection, the mechanics of the swing, the weight of the bat and the physical regimen are some important factors. While players are developing (typically in the minor leagues of the first few years of MLB experience), there’s possibility of transition from one style to another. But deep into one’s tenure as a professional, the transition is almost unheard of. This accounts for much of the circumstantial evidence people gravitate toward in the case of Bonds and alleged steroid usage.

But what about the venture investment business? Can someone make the switch from one investment style to another? It’s a relevant question to ask because today’s investment climate for web ventures provides strong incentives to be the venture equivalent of a doubles-hitter. Read more »

• Web 2.0 Is A Gift - Not A Threat To VCs
• Recent Acquisitions by Yahoo!/Google/Microsoft

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