Monthly Archive for April, 2008

It’s all still alpha in my eyes

The invention of hypertext has been the most revolutionary thing since two previous technologies before: the printing press and the alphabet. Combined with computing and the Internet, we have seen a new world represented by the World Wide Web that has transformed entire industries in its mere 19 15 year existence.

The web caught our imagination in the nineties, which became the Dot-Com bubble. Several years after the bust, optimism reawakened when the Google machine listed on the stock exchange – heralding a new era dubbed “web2.0”. This era has now been recognised in the mainstream, elevated by the mass adoption of the social computing services, and has once again seen the web transform traditional ideas and generate excitement.

davewiner
The web2.0 era is far from over – the recent global recession however has flagged though that the pioneers of the industry are looking for something new. As the mainstream is rejuvenated by web2.0 like the Valley was not that long ago, it’s time to now look for what the next big thing will be. Innovation on the web is apparently flattening. Perhaps it has – but the seeds of the next generation of innovation on the web are already here.

Controversy of the meaning of web2.0 – and what its successor will be – should not distract us. We are seeing the web and associated technologies evolve to new heights. So the question is not when web2.0 ends, but what are we seeing now, that will dominate in the future?

My view:
• The mobile web. The mobile phone is now evolving into a generic entertainment device, becoming a new computing device that extends the reach of the internet. First with the desktop computer, and then with the laptop computer – new opportunities presented themselves in the way we could use computers. The use of this new computing platform will create new opportunities that we have only scratched the surface.
• The 3D web. Visit second life, the virtual world, as you quickly note the main driver of activity is sex and that it’s just a game. However, porn and games have spearheaded a lot of the innovation of technology in the past. The 3D web is now emerging with four separate but related trends: virtual worlds, mirror worlds, augmented reality and lifelogging.
• The data web. Data has now become a focus in the industry. The semantic web, eventually, will allow a weak form of artificial intelligence that will allow computer agents to work in an automated fashion. Vendor Relationship Management is changing the fundamental assumptions of advertising, with a new way of how we transact in our world. Those trends, when combined with the drive for portability of peoples data, is having us see the web in a new light with new potential. Not as a collection of documents, and not as a platform for computing, but as a database that can be queried.

So to get some discussion, I thought I might ping some smart people I know in the industry on what they think: Chris Saad, Daniela Barbosa, Ben Metcalfe, Ross Dawson, Mick Liubinskas, Randal Leeb-du Toit, Stewart Mader, Tim Bull, Seth Yates, Richard Giles as well as you reading this now.
What do you think is currently in the landscape that will dominate the next generation of the web?

What is the DataPortability Project

When we created the DataPortability workgroup in November 2007, it was after discussion amongst a few of us to further explore an idea; a vision for the future of the social web. By working together, we thought we could make real change in the industry. What we didn’t realise, was how quickly and how big the attention generated by this workgroup was to be. A press release has been released that details the journey to date, which highlight’s some interesting tidbits. What I am going to write below, are how my own thoughts have evolved over the last few months, and what it is that I think DataPortability is.

1) Getting companies to adopt open, existing standards
RSS , OpenID , APML , oAuth , RDF , and the rest. These technologies exist, with of which have been around for many years. Everyone that understands what they are, know that they rock. If these standards are all so great – why hasn’t the entire technology industry adopted them yet? Now we just need awareness, education and in some cases pressure on the industry heavies to adopt them.

2) Create best practices of implementing these standards
When you are part of a community, you are in the know, and don’t realise how the outside world looks in. Let the standards communities focus their precious energies on creating and maintaining the technologies; and DataPortability can help provide resources for people to implement them. Is providing PHP4 support for oAuth really a priority? It isn’t for them – but by pooling the community with people that have diverse skillsets and are committed to the overall picture, it has a better chance of happening.

3) Synthesise these open standards to play nice with each other.
All these different communities working in isolation have been doing their own thing. An example is how Yadis-XRDS are working on service discovery and have a lacklustre catalogue. Do we just leave them to do their own thing? Does someone else in Bangalore create his own catalogue? (Which is highly likely given the under-exposure of this key aspect to groups needing it for the other standards, and the current state its in). Thanks to Kaliya for mentioning that the XRDS guys have been more then proficient in working with other groups – "how do you think their spec is part of the OpenID spec?". Julian Bond goes on to say: "Yadis-XRDS is only months old and XRDS-Simple is literally days old…Having trouble thinking of a community that is working in isolation. And that isn’t likely to be hugely offended if you suggested it. " So let me leave the examples here, and just say the DataPortability Project when defining technical and policy blueprints, can identify issues and from the bigger picture perspective focus attention on where it’s needed. By embracing the broader community, and focusing our attention on weaknesses, we can ensure no one is reinventing wheels .

4) Communicate all the good things the existing communities are doing, under the one brand, to the end user.
RSS is by far the most recognised open standard. Have you ever tried explaining RSS to someone who is outside of the tech industry? I have. Multiple times. It’s like I’ve just told them about the future with flying cars and settlements on Mars. I’ve done it in in the corporate world, to friends, family, girls I date, guys I weight train with and anyone else. Moving onto OpenID – does anyone apart from Scoble and the technorati who try all the webservices they can, really care? Most people use Facebook, Hotmail (the cutting edge are using Gmail) and that’s it. On your next trip to Europe ask a cultured French (wo)man if they know what OpenID is; why they need it; what they can do with it. Now try explaining RSS to the mix. And APML. And oAuth. Bonus if you can explain RDF to yourself.

Wouldn’t it be just easier if you explained what DataPortability is, and explained the benefits that can be achieved by using all these standards? Standards are invisible things that consumers shouldn’t need to care about; they just care about the benefits. Do consumers care about the standards behind Wi-Fi, as defined by Zero-conf – or do they care about clicking "enable wireless" on their laptop and them connecting to the Internet. If you are going around evangelising the technical standards, the only audience you will get are the corporates in IT departments, who couldn’t care less. The corporate IT guys respond to their customer/client facing guys, who in turn respond to consumers – and consumers couldn’t care less on how its done, but just what they can do. Have the consumer channel their demand, and it benefits the whole ecosystem.


The new DataPortability trustmark

It has been said the average consumer doesn’t care about DataPortability. Of course they don’t – we are still in the investigation phase of the Project ; which later on will evolve to the design phases and then evangelising phases. We know people would want RSS, oAuth, and the rest of the Alphabet soup – so lets use DataPortability as a brand that we can communicate this. Sales is about creating demand – lets coordinate our ‘selling’ to make it overwhelming – and make it easy for consumers to channel that want in a way they can relate to. You don’t say "oAuth"; you say "preventing password theft" to them instead.

5) Make the business case that a user should get open access to their data
Why should Facebook let other applications use the data it has on its servers? Why should google give up all this data they have about their users to a competitor? Why should a Fortune 500 adopt solutions that decentralise their control? Why should a user adopt RDF on their blog when they get no clear benefit from it? Is a self-trained PHP coder who can whack something together, going to be able to articulate that to the VC’s?

The tech industry has this obsession that nothing gets done unless the developers are on board. No surprises there – if we don’t have an engineer to build the bridge, we are going to have to keep jumping off the cliff hoping we make it to the other side. But at the same time, if you don’t have the people persuading the people that would fund this bridge; or the broader population about how important it is for them to have this bridge – that engineer can build what he wants but the end result is that no one will ever walk on it. Funny how web2.0 companies suck at the revenue model thing : overhype on the development innovation, with under-hype on the value-proposition to the ordinary consumer who funds their business .

Developers need to be on board because they hassle their bosses and sometimes that evangelising from within works; but imagine if we get the developers bosses bosses on board because some old bear on the board of directors wants DataPortability after his daughter explained it to him (the same person that also told him about Facebook and Youtube). I can assure you, as I’ve seen it first hand with the senior leadership at my own firm, this is exactly what is happening.

Intel is one of the best selling computer-chip companies in the world. Do you really think as a consumer I care about what chip my computers works on? Logically – no. But "Intel’s Inside" marketing campaign gave them a monopoly, because end consumers would ask "does it have intel inside?" and this pressure forced Intel’s customers (IBM and the rest) to actually use Intel. Steve Greenberg corrects me by saying "The Intel Inside campaign came a decade after Intel took over the world. It wasn’t what got them there. It was in response to Microsoft signaling that they liked AMD. Looked like AMD was going to take off… but then they didn’t". So my facts were slightly wrong, but the point still remains.
At the same time, it isn’t just political pressure but its also to educate. I genuinely believe opening up your data is a smart business strategy that will change the potential of web services.

You make people care by giving them an incentive to do it (business opportunities; customer political pressure; peer pressure as individuals and an industry which later evolve to industry norms). The semantic web communities, the VRM communities, the entire open standards communities – all have a common interest in doing this. DataPortability is culture change on an industry wide level, that will improve the entire ecosystem. Apparently innovation has died – I say it’s just beginning .

Information overload: we need a supply side solution

About a month ago, I went to a conference filled with journalists and I couldn’t help but ask them what they thought about blogs and its impact on their profession. Predictably, they weren’t too happy about it. Unpredictably however, were the reasons for it. It wasn’t just a rant, but a genuine care about journalism as a concept – and how the blogging “news industry” is digging a hole for everyone.

Bloggers and social media are replacing the newspaper industry as a source of breaking news. What they still lack, is quality – as there have been multiple examples of blogs breaking news that in the rush to publish it, turns out it was in fact fallacious . Personally, I think as blogging evolves (as a form of journalism) the checks and balances will be developed – such as big names blogs with their brands, effectively acting like a traditional masthead. And when a brand is developed, more care is put into quality.

Regardless, the infancy of blogging highlights the broader concern of “quality”. With the freedom for anyone to create, the Information Age has seen us overload with information despite our finite ability to take it all in. The relationship between the producer of news and consumer of news, not only is blurring – but it’s also radically transforming the dynamics that is impacting even the offline world.

Traditionally, the concept of “information overload” has been relegated as a simple analysis of lower costs to entry as a producer of content (anyone can create a blog on wordpress.com and away you go). However what I am starting to realise, is the issue isn’t so much the technological ability for anyone to create their own media empire, but instead, the incentive system we’ve inherited from the offline world.

Whilst there have been numerous companies trying to solve the problem from the demand side with “personalisation” of content (on the desktop , as an aggregator , and about another 1000 different spins), what we really need are attempts on the supply side, from the actual content creators themselves.

info overload

Too much signal, can make it all look like noise

Information overload: we need a supply side solution
Marshall Kirkpatrick , along with his boss Richard McManus , are some of the best thinkers in the industry. The fact they can write, makes them not journalists in the traditional sense, but analysts with the ability to clearly communicate their thoughts. Add to the mix Techcrunch don Michael Arrington , and his amazing team – they are analysts that give us amazing insight into the industry. I value what they write; but when they feel the stress of their industry to write more, they are not only doing a disservice to themselves, but also to the humble reader they write to. Quality is not something you can automate – there’s a fixed amount a writer can do not because of their typing skills but because quality is a factor of self-reflection and research.

The problem is that whilst they want, can and do write analysis – their incentive system is biased towards a numbers system driven by popularity. The more people that read and the more content created (which creates more potential to get readers) means more pageviews and therefore money in the bank as advertisers pay on number of impressions. The conflict of the leading blogs churning out content , is that their incentive system is based on a flawed system in the pre-digital world, which is known as circulation offline, and is now known as pageviews online.

A newspaper primarily makes money through their circulation: the amount of physical newspapers they sell, but also the audited figures of how many people read their newspaper (readership can have a factor of up to three times the physical circulation ). With the latter, a newspaper can sell space based on their proven circulation: the higher the readership, the higher the premium. The reason for this is that in the mass media world, the concept of advertising was about hitting as many people as possible. I liken it to the image of flying a plane over a piece of land, and dropping leaflets with the blind faith that of those 100,000 pamphlets, at least 1000 people catch them.

It sounds stupid why an advertiser would blindly drop pamphlets, but they had to: it was the only way they could effectively advertise. For them to make sales, they need the ability to target buyers and create exposure of the product. The only mechanism available for this was the mass media as it was a captured audience, and at best, an advertiser could places ads on specialist publications hoping to getter better return on their investment (dropping pamphlets about water bottles over a desert, makes more sense than over a group of people in a tropical rainforest). Nevertheless, this advertising was done on mass – the technology limited the ability to target.

catch the advert

Advertising in the mass media: dropping messages, hoping the right person catches them

On the Internet, it is a completely new way to publish. The technology enables a relationship with a consumer of content, a vendor, a producer of content unlike anything else previously in the world. The end goal of a vendor advertising is about sales and they no longer need to drop pamphlets – they can now build a one on one relationship with that consumer. They can now knock on your door (after you’ve flagged you want them to), sit down with you, and have a meaningful conversion on buying the product.

“Pageviews” are pamphlets being dropped – a flawed system that we used purely due to technological limitations. We now have the opportunity for a new way of doing advertising, but we fail to recognise it – and so our new media content creators are being driven by an old media revenue model.

It’s not technology that holds us back, but perception
Vendor Relationship Management or (VRM) is a fascinating new way of looking at advertising, where the above scenario is possible. A person can contain this bank of personal information about themselves, as well as flagging their intention of what products they want to buy – and vendors don’t need to resort to advertising to sell their product, but by building a relationship with these potential buyers one on one. If an advertiser knows you are a potential customer (by virtue of knowing your personal information – which might I add under VRM, is something the consumer controls), they can focus their efforts on you rather than blindly advertising on the other 80% of people that would never buy their product). In a world like this, advertising as we know it is dead because we know longer need it.

VRM requires a cultural change in our world of understanding a future like this. Key to this is the ability for companies to recognise the value of a user controlling their personal data is in fact allowing us new opportunities for advertising. Companies currently believe by accumulating data about a user, they are builder a richer profile of someone and therefore can better ‘target’ advertising. But companies succeeding technologically on this front, are being booed down in a big way from privacy advocates and the mainstream public. The cost of holding this rich data is too much. Privacy by obscurity is no longer possible, and people demand the right of privacy due to an electronic age where disparate pieces of their life can be linked online

One of the biggest things the DataPortability Project is doing, is transforming the notion that a company somehow has a competitive advantage by controlling a users data. The political pressure, education, and advocacy of this group is going to allow things like VRM. When I spoke to a room of Australia’s leading technologists at BarCamp Sydney about DataPortability, what I realised is that they failed to recognise what we are doing is not a technological transformation (we are advocating existing open standards that already exist, not new ones) but a cultural transformation of a users relationship with their data. We are changing perceptions, not building new technology.

money on the plate

To fix a problem, you need to look at the source that feeds the beast

How the content business will change with VRM
One day, when users control their data and have data portability, and we can have VRM – the content-generating business will find a light to the hole currently being dug. Advertising on a “hits” model will no longer be relevant. The page view will be dead.

Instead, what we may see is an evolution to a subscription model. Rather than content producers measuring success based on how many people viewed their content, they can now focus less on hits and more on quality as their incentive system will not be driven by the pageview. Instead, consumers can build up ‘credits’ under a VRM system for participating (my independent view, not a VRM idea), and can then use those credits to purchase access to content they come across online. Such a model allows content creators to be rewarded for quality, not numbers. They will need to focus on their brand managing their audiences expectations of what they create, and in return, a user can subscribe with regular payments of credits they earned in the VRM system.

Content producers can then follow whatever content strategy they want (news, analysis, entertainment ) and will no longer be held captive by the legacy world system that drives reward for number of people not types of people.

Will this happen any time soon? With DataPortability, yes – but once we all realise we need to work together towards a new future. But until we get that broad recognition, I’m just going to have to keep hitting “read all” in my feed reader because I can’t keep up with the amount of content being generated; whilst the poor content creators strain their lives, in the hope of working in a flawed system that doesn’t reward their brilliance.

The most important lesson in business

Over the weekend, I attended a conference (I was even quoted in the press, despite disclaiming before one of my presentations I was scattered from a terrible hangover!). In one of the sessions, where the brilliant guys at Australian start-up company Good Barry shared some of their lessons, an audience member asked the question of when should they get lawyers and accountants to help them out.

I think this was a very good question and one I will answer here. Why can I? Because I am (nearly) a chartered accountant ; an experienced external auditor; and an employee in one of the biggest firms in the world that makes money from guys like me doing services for people like you.

There are four areas accountants help a business:

1) Reporting & compliance. Whether you run a business and want to know what’s happening (ie, measurement on your employees output so you can track how big their bonus will be) – or you need to create some type of reporting to external stakeholders (like investors, banks, shareholders) – accountants have the skills to ensure you create the appropriate reports. Reports can vary from custom internal ones to help assess things, to government mandated ones like financial reports to statutory authority’s or the tax office

2) Tax. It wasn’t until I studied tax, that I realised how valuable tax accountants are. Tax is the biggest expense of anyone – individual or company – and there are plenty of legal tricks to avoid paying. Specialist accountants can help you structure your business in a way, where you minimise this expense. People can spend an entire life understanding just one aspect of the tax code. It’s massive. Trust me, a good tax adviser is worth their weight in gold.

3) Assurance. If you produce financial reports, you need to get audited by special types of accountants, who will verify your numbers to make sure you are not talking crap. However auditors are also very experienced in understanding how businesses should be run (so would you if you visited dozens of companies every year analysing them inside out), so they can also add a lot of value by helping assess your business during the audit and making recommendations on improving how you run. They do this, because during an audit they see everything and often have a more complete view of a business than management. A very useful thing accountants can help with, is by developing your internal control framework. What this means, is helping set up systems so that it runs like a proper business. For example, making sure two people sign a cheque is a ‘control’ – and a very important one, because without it, people can be signing cheques to themselves and running away with your money (it happens more frequently than you think).

4) Decision making. These types of accountants are called management accountants, and they can help analyse the numbers of a business to assist strategic decisions. For example, should you buy a company? A management accountant has the skillset to provide the analysis on whether it will be worth while. Management accountants help interpret information, to make important decisions for the business.

What help does a start-up company need from an accountant

The most important thing you need to know, is CASHFLOW. You need to maximise the amount of working capital – cash you’ve got on hand – at any one time. It’s seems simple enough that you need to make sure you make more money than you spend, but you will be surprised how easily people overlook this. Possibly in the Internet startup culture funded by vulture venture capitalists, people forget that the money they are spending is not real money.

Accountants can help maximise your cashflow. They can help with cash strategies like for example all that money sitting in the bank, why not put it somewhere and earn interest on it? They can help with cash management to maximise your working capital: smart ideas like pay your creditors as late as possible (people you owe); chase your debtors every day (people that owe you). However you don’t need an accountant to watch your cashflow. You just need you to recognise its importance. Get that? Accountants can do a lot. But if you are a startup, cashfow is all you need to know.

Do you need an accountant for fix up your controls? This only matters when you have hundreds of people in an organisation and things get complex. Controls are the difference between a small company run like a family business, and a big business. Matured startups like Atlassian that make $30million a year, need to consider controls. You? No.

Do you need an accountant for your tax strategies? Well hey buddy, if you aren’t making money, you haven’t got any tax to pay, right?

Do you need an accountant to help make management decisions? Sure you do – but if you have common sense, you can to. Accountants can give you a better analysis of your business from your untrained mind, but you need cash to pay them to do that.

Do you need an accountant for financial reporting? In Australia, unless your gross operating revenue is over $10 million a year; and you have over 50 employees or $5 million in assets, you are considered a small private company that is not required to lodge reports. So stop dreaming about your goal to list your company on the stock exchange, and get back to thinking about the cashflow.

So going back to the question of when does a start-up need an accountant. Well look, if you hire me I can whack some sense into you. But if you have half a brain, you will take this lesson in understanding that cashflow in king. Focus on that first, and then you can worry about the rest if the cashflow is there.

How business is done on the Internet

Day in and day out, the Internet continues to show innovations from people all around the world. Yet for all these innovations, it all comes down to the very core of trying to do business in a new way.

I’ve been doing some research recently for an internal publication my firm produces on the future of the entertainment and media industries, and I wondered what exactly does it mean to do business on the Internet. Whilst there are some brilliant thoughts on what business models on the Net are, I think we lack a proper analysis of what it means to do business.

Below is a summary of my understanding from a consumer perspective of doing business (enterprise is a different beast), but which I think will help people better understand how it all works.

First of all, we need to split the three key factors about business:

  1. Business models: What the structure of a business is.
  2. Revenue models: How the business generates cash from customers to fund its operations.
  3. Product models: What the product is that you provide to your customers to generate the cash

Too often, these three components are mixed as one or the same. Another thing that happens, is we struggle to classify the Internet because it contains so many different types of business. Breaking it down gives us more complete view.

Business models

The first thing to understand, is how a business is structured of which there are three varieties:

  1. Destination: driving consumers to a point ie, a website that you try to drive usage by consumers. This was very much what the early Internet was in the manifestation of the world wide web; websites attempting to get ‘eyeballs’. Your business model is based on the premise of getting people to visit your destination.
  2. Platform: a service that you try to build usage by creating an ecosystem for. Arguably, the web is the platform but in reality we are seeing a different type of platform akin to the Microsoft Windows approach of creating a core service that others can build on. You could classify the web2.0 view that websites are communities in this, whereas there are companies trying to create operating systems on the web for widgets that are a similar thing. Your business model, is built on the premise that people interact on your service or use your platform.
  3. Network: a service that people use regardless of where they are on the Internet. This type of business is about attaching to a user as they use the Internet. It’s almost like the flipside of the above two models: instead of having everyone come to you, this is about following everyone wherever they are. Your business model is built on the premise that people use your service in a decentralised manner.

Revenue models
Revenue models are a key factor to understand as they are what sustain long term changes to an industry that is currently been pushed by venture money and acquisitions from the dominant players. There are four types of monetisation models that I can observe:

  1. Fees: Payment of a fixed amount for access or usage of goods and services over the internet
  2. Subscription: Payment of a fixed amount on a periodic basis for access or usage of goods and services
  3. Commission: Payment of a percentage fee of a transaction
  4. Attention: Consumer gives their time, such as viewing an advertisement, in exchange of goods and services

Product models
There are three types of product models:

  1. Markets is the term I am using to explain when businesses use the Internet as a way to allow others to transact goods and services. The product offered by these companies is effectively a mechanism to do commerce. For example, eBay offers a product model that gives the ability for people to auction goods. Their product is to offer the facility for vendors and consumers to transact. They are like a shopping centre, giving space for vendors to sell and centralising the space so that consumers know where they can buy from these vendors. Markets offer the ability to perform trade of some sort with other parties
  2. Hypermedia is the term I am using to describe any type of content offering to people. Philosophically, it falls under the “new media” category that I have previously linked to and I use the term coined by Ted Nelson which is the broader term coined at the same time as “hypertext”. Effectively, you are offering content to a consumer in an Internet environment. Formally defined, it is access or supply of content via visual, audio and/or text over the Internet
  3. Utility computing is what you can call search engines, web applications, and the software as a service variety, which essentially is about providing computing services for information. Maybe a better way to define the concept is that they are computing services that allow for productivity through information retrieval, creation or management.

It is important to note that a business doesn’t have to restrict itself to just one of the above sub-categories. A business must have at least one business model, one revenue model, and one product model (or rather, they should – web2.0 startups seem to forget the revenue model bit). But within those groupings, it doesn’t have to be just one.

Take for example Facebook, which was initially a destination business – people logged in, viewed peoples profiles and their news feed, and the company generated value for the user by them ‘visiting’. With the launch of the applications platform, Facebook became a platform, because it allowed other entities to build on top of its core service. In this regard, Facebook generated value by creating an ecosystem of applications within its confines. As for a network model, Facebook is yet to to this, but imagine if they created an ad network like Google’s – whereby information about you in Facebook is used to determine what advertising to see across the entire internet. Here the value is that Facebook helps add to your experience across the entire Internet (despite being off the actual site)

So as a concept, below is my matrix of doing business on the Internet (I’m graphically inept, but I want to illustrate the three dimensions conceptually). What do you think?

business on the net

If you can draw better than me (not hard), I’ll credit you on this post!

Update May 27 2010: Rethinking this two years on, I think this still stands as a rough analytical framework. But I now believe that business model makes sense for the overall discussion above (ie, the combination of all the components), and what I term as ‘business model’ in the post is actually more like the ‘operating model’ of a web business.