Archive for the 'Trends' Category

Web 3.0 will not be on the web

It’s Saturday 7pm. A pretty airline hostess friend of mine was in San Francisco for the night, wanting to do drinks. What to do?

I was knocking on the door of a home in Palo Alto that had a Guy Fawkes mask on a Christmas reef. As for why, it was to attend the first ever Decentralized Autonomous Society Meetup, an event with a minimal description other than a title “Let the revolution begin”. The event reads:

In the early 90s the cypherpunk movement held its meetup in Palo Alto, working through many ways in which cryptographic technology could be used to promote human freedom. Eventually Bitcoin was born.

Today we discuss how the second wave of blockchain innovation can enhance human freedom.

The house was packed. Hours earlier, TechCrunch had posted  Decentralise All The Things! and mentions Ethereum and Maidsafe who are leaders in the movement. In my search to find a solution to a business challenge I have, I inadvertently was now at a meetup where one of the speakers was a representative from Maidsafe and another speaker representing Ethereum. But not just that: I found myself after the talks talking to the globe trotting Vitalik Buterin, the inventor and chief scientist of Ethereum.

Although I had been tracking Bitcoin for a few years now and evangelising it behind closed doors to influential politicians, business executives and my network, a frustration I had was that no one understands the true impact.  This is something that has been on my mind every since I become aware of after a talk by former Googler Mike Hearn in 2012.

That changed a few months ago, when I stumbled on Ethereum’s white paper and found it the single best document describing the state of cryptocurrency and its potential beyond being simply a means of exchange as Bitcoin is known. Ethereum’s creator might only be 20, but with his former project being the Bitcoin magazine which has been an invaluable resource to understand Bitcoin, he comes across to me as probably having one of the deepest understandings of cryptocurrencies, their potential — and weaknesses.

Both Vitalik and I hold a mutual view that we don’t know what the future of Bitcoin is and if it will last. But after talking to him, I had in no doubt that I had met a genius that one day may be regarded like Tim Berners-lee who created the world wide web.

Separately, I was talking with one of the organisers, and he was excited I understood the potential of DAO (Decentralised Autonomous Organisations) and similarly remarked at his frustration that most investors in Silicon Valley don’t seem to get it. Given silicon valley investors are beating the drum roll of Bitcoin’s world domination despite the rest of the world not getting it, you can take that to be a sign this is pretty early days of the Decentralised Autonomous movement.

But let me get to the point of why I’m even writing this — both due to something Vitalik said to me and that I separately read yesterday that he pointed me too. He referred me to a recent blog post on secret sharing and where he writes a money quote in the conclusion of the article explaining DAO’s as follows:

If the blockchain is a decentralized computer, a secret sharing DAO is a decentralized computer with privacy

In a world where no one can really explain it yet, that explains DAO’s beautifully. But let’s back it up: blockchain, one of the four technologies underpinning Bitcoin (the others being PGP, Proof-of-work (such as mining which includes hash functions and Merkle trees ), and peer-to-peer)…is a computer? When I prodded Vitalik about what use-cases he was prioritising ahead the Ethereum 1.0 release later this year (March), he eventually responded: “It’s hard to prioritise one use case when you’re building a computer!”.

And that’s exactly what’s going on. This is all software, architecture and philosophical vision for a decentralised world, bringing the Internet back to its roots. In the process, this will enable a weak form of artificial intelligence. If hypertext is what underpins the web and has transformed the world of communications, then cryptography is what underpins the blockchain and will be transforming our world starting with payments but beyond that such as any system where “trust” is needed like elections, contracts and more. The power being the computers manage the “trust” (no humans tampering with it) and can automate the enforcement.

3D printing and Dones are two long term technologies that I regard as inevitable and game changing. It just might take 20 years for us to fully realise it. Well, Bitcoin, blockchain and crypto-currencies is my other main trend — but the externalities of that trend such as the Ethereum project and the ecosytem building around it, is something I think everyone should have on their radar that I think is akin to the web starting.

This year will see Ethereum 1.0 released (roadmap) with a chat application, a browser, as well as the ability for people to build their own applications with javascript — and we’ll also see the Bitcoin foundation be transitioning to a block-chain based voting system for its 2000 members which if it happens will become the highest profile example of DAO principles in action, beyond the Bitcoin network itself and the blockchain voting by the Danish political party.

Don’t get me wrong, this is not something that I’m early to identify rather it’s been in my face: at my business StartupHouse, we host events for Bitcoin developers and its intrigued me in their grass roots support. Combined with my reading, once you begin to understand the value of a blockchain, the power of cryptography, and what you can do outside of currency — then maybe, just like me and thousands of grass roots community support in silicon valley and around the world, you’ll begin see the emergence of something. A something driven by a frustration to emerge from the world post the credit crunch induced recession, government abuse of power with people’s money, and inequality where the few are owning more of our society’s capital.

A vision that, maybe, just might be a revolution in how the world operates that is as dramatic as what the world was like before the web. Stay tuned.

The changing dynamics of news

In the recent controversy that has erupted due to the firing of Michael Arrington from TechCrunch, I believe it represents an era in innovation led by TechCrunch that we’re only starting to appreciate.

To start on this thought experiment, consider how four years ago (meaning, things haven’t changed) I wrote about the two kinds of content that exist: data like breaking news or archived news; and culture which includes analysis like editorials and entertainment such as satire.

UnderstandingI argue that each content form has unique characteristics that needs to be exploited in different ways. Think about that before digesting this blog post, because understanding the product (such as news) impacts the way the market will operate.

Some trends of the past
Over the last two decades, we’ve seen the form (and costs) of news be disrupted dramatically.

It started with hypertext systems that helped humans share knowledge (with the most successful hyperterxt implementation, the world wide web 20 years ago forever changing the world); search engines helping us find information easier (with Google transforming the world 10 years ago), and content management systems helping people reduce the costs of publishing to practically zero (with Moveable Type and especially WordPress driving this).

While the sourcing of news still requires unique relationships that journalists can extract to the world, even that’s changed due to social media that’s created a distributed ‘citizen journalism’ world. Related to this is a movement Julian Assange calls “scientific journalism” where the sourcing of news is now democratised and exposed in its raw form.

Some observations of the present
With that, I’ve noticed two interesting things about the tech news ecosystem, who are are helping shape the trends in news more broadly: tech bloggers kill themselves to break stories, to the point where blogs like TechCrunch have become cults for those that work there; separately, the rise of the news aggregators like TechMeme and HackerNews (or Slashdot and Digg before them) have built the audiences who have been overwhelmed by information overload and crave a filter from a quality editorial voice (the latter being why news personalisation technologies cannot work on their own).

The big secret (that’s not particularly secret due to the abundance of ‘share this’ buttons on webpages) about the news ecosystem is that it’s the aggregators who drive traffic to news outlets that report the news. When you understand that point, a lot of other things become clearer.

Content Aggregation infographic

On the other hand, tech entrepreneurs break their backs for the hope of getting written about on the Tech blogs. The reasons vary from getting credibility so they can recruit talent; exposure so they raise money; and a belief that they can acquire customers (the whole point of building a startup).

Which leads me to think despite all these random observations I’ve listed above, there is a fundamental efficiency evolving in news reporting that may give an insight into the future.

Let’s keep thinking. Other things to consider include:

  • The audience starts with the aggregators for news and the articles whereby the better headlines tend to perform better
  • News in its barest form is making awareness of an event (data); anything additional is analysis (cultural) which is to shape understanding around the event
  • The rise of ‘scientific journalism’ and social media allows society to discover and share information without a third party (due to technology tools).
  • Press releases are an invention to communicate a message so reporters can base their writing on, who often just copy and paste the words.

Some thinking about the future
News should be stripped to its barest form: a description of the event. It should be what we consider currently a “headline”, with preferably a link to the source material. Therefore professional journalists, bloggers, and the rest of the world should be competing to break news not on who can write the best prose but who can share a one line summary based on their ability to extract that information (either by being accidentally at the event or having exclusive relationships with the event maker). The cost of breaking the news should be simply a matter of who can share a link the quickest.

News Article - Wichita Falls Record News

Editorial, which is effectively analysis (or entertainment in some cases) and what blogging has become, should be left to what we now consider as “comments”. Readers get to have the “news” coloured, based on a managed curation of the top commentators.

Tying this together: Imagine a world where anyone could submit “news” and anyone could provide “editorial”? A rolling river of news of submitted headlines and links, and discussions roaring underneath the item reflecting the interpretation of the masses.

You could argue Twitter has become the first true example of that where most content is in full public view but with a restricted output (140 characters); people can share links with their comments; and the top stories tend to get retweeted which further gains exposure. Things could be similarly said about Digg, Reddit and Hacker News. But these services, along with Twitter (and Facebook) are simply an insight into a future that’s already begun. I think they are just early pioneers before the real solution comes, similar to how Tim Berners-Lee created a hypertext system in a saturated market that then became the standard; Google created a search engine in a saturated market that then became the standard; and WordPress created a blogging platform in a saturated market that then become the standard. Lots of people have tried to innovate in the news ecosystem, but I still don’t think the nut’s been cracked.

News has a lot of value, but there is different value based on who breaks it and who interprets it. For example, when I fire up some of my favourite aggregators, I tend to not click on the original headline but on brands I like so as to read their take on the event (though when I’m deeply looking into something, I dig for the source material). But the problem with news now, is there is a fundamental disruption on the cost structures supporting it: the economics favour those who break the news, with those that interpret news suffering as traditionally both these roles were considered the one function. Something’s going on and the answer is cheaper production, faster distribution and more of a decentralised effort across society and not the self-appointed curators.

While the newspaper industry is collapsing, something more fundamental is happening with news and we’re simply in the eye of the storm. Stay tuned.

Why ICANN’s changes to TLD matter

ICANN two months ago made an announcement that domain names can now be extended beyond the generic TLD’s set (they also are allowing the use of non-Latin characters such as Cyrillic, Arabic, Chinese, etc). Meaning, instead of everyone competing to get a “.com”, people can buy “.yourbrand” and create websites off that. I think it’s brilliant — Ester Dyson, the founding chairperson of ICANN, doesn’t agree.

As someone that’s developed multiple online properties, organisations (both for-profit and not-for-profit) and had people try to rip-off several brands I’ve created, I’ve experienced enough to welcome this as a huge step forward — and here’s why.

ICANN’s strategy originally wanted to disrupt a market place player, which is why they assigned these generic TLD’s like .org and .net (.com was controlled by a corporation). But what matters now is not the historical reasons but what will benefit the world based on historical experience (and failed strategy). That benefit is better consumer protection and reduced costs of business.

Let’s rethink this
Consider the following:
(1) The purpose of a trademark is to allow customers the ability to distinguish what they are buying. It’s for the customer’s protection first.
(2) A domain name is simply a human-intelligent way to to access ip address. Whether it’s apple.com or apple.eats.microsoft — the point isn’t one of branding, but for humans to be able to identify a resource they seek.
(3) While there are plenty of domain names available, good ones no longer exist. There is a bias to having a “.com” and it’s why many companies from the web2.0 era had to resort to creative domains like del.icio.us and missing vowels like flickr.com

What the historical DNS system has done is create an unnecessary scarcity where domain name registrars and brokers of ‘premium’ domain names benefit. Having a company own the name space like “.IBM” makes perfect sense because “.com”, “.org”, and “.net” have lost their original meaning of distinguishing “commercial” businesses over “non-profits” and the like.

What matters more is that when a consumer wants the comfort of the company they seek, they can do it with the assurance it’s correct. “.paypal” for example could have huge implications for fraud detection for consumers (some fraud is done due to misspelled domains similar to the target or switching .com with another TLD). Better still, it actually decreases the cost of businesses for companies because they no longer need to chase the unlimited TLD variations of their name to protect their brand — which they only did so, so they wouldn’t lose customers confused by confusing branding.

ICANN’s changes are a radical change, but they are perfectly in line with the original intent of trademark law. Sorry Ester, but you’re wrong on this one.

Quora will give stock options to celebrities, reject a Google acquisition

It’s a private company so we may never know. But one thing that’s clear, is that the circumstances surrounding its growth are mimicking things we’ve seen in the last few years. The below are some specific thoughts on where I see Quora heading in 2011 and beyond.

1) Its growth will be driven by celebrities
A year ago, I asked if Twitter gave stock options to celebrities, which would explain the bizarre trend that had celebrities embrace the service. I’m willing to bet money they did.

Steve Case, the billionaire founder of AOL, recently has been actively answering questions on Quora, and it is awesome to see the responses. Now imagine if this domain knowledge in tech was expanded to people asking questions about celebrities? Let’s not forget Twitter started as a tech industry thing (I was told in May 2007, when I first started networking in the Sydney scene, that it was the ‘thing’ I had to have to have credibility) — it was a way to network in tech and track interesting people. Thinking back, it was transformative because successful people in tech were now accessible to new upstarts like me. In the years to follow, we saw Ashton Kutcher’s CNN race for one million followers combined with the Oprah moment, that suddenly saw it become mainstream, transformed into a way to track your favourite celebrities which is what drives its growth now.

So imagine if Quora gave stock options to all the interesting people of the world and they started answering questions? Imagine it being a direct way to interact with elected officials? Keep reading, this is not the first time we’ve seen this.

2)It will break news and information
Quora did something interesting a few months ago: it helped unravel some big news in the industry. It will do this again.

Its recognition in the mainstream (give it 2 years at least) will be if two things can occur: a massive tragedy occurs that uses Quora as a form of distributing reporting and citizen journalism; and the 2012 presidential candidates use it as a way to engage with voters. Who knows, maybe 2012 is too soon but like Twitter, it will be those two kinds of events that will make it mainstream. (For context on this, read my post from two years ago which explains the origins and rise of social media.) The service is perfectly setup to cater for both situations in a way that exceeds both the ability of Facebook and Twitter, its cousins in the social media world that is driving this broader trend in the world.

3) Google will try to buy them
Quora’s “social” competency complements Google’s lack in that area. Which ironically, is because both founders were early and senior employees of Facebook…the same reason I believe the Obama campaign led to him becoming the first social media president (as another early employee and “co-founder” of Facebook, Chris Hughes, was responsible for Obama’s Internet strategy).

Google is trying really hard to catchup on social, an area Facebook dominates and what will lead to Google losing its leadership in the industry. Despite all the rumours of its internal social networking initiatives, the numerous products launched so far have all been ordinary. And it’s for good reason: Google doesn’t get social. It can’t, it’s not in its DNA.

Google has an engineering culture where decisions are made based on data. Google’s former top designer quit because of “a design philosophy that lives or dies strictly by the sword of data”. Rather than trust the talent of its designers, it instead would over-rule decisions based on user metrics — which in a conversion business, makes sense. But the thing about user experience, its about shaping new behaviours rather than relying on existing patterns.

Which interestingly, is what Quora is excelling at: its user experience is inspiring the entire industry (like the Angel List crew, who in turn are inspiring an entire industry). That’s an impressive thing to do as a startup, and shows innovation in an area that is key to engagement — engagement that Google can’t seem to get.

4) They will decline a Google acquisition and do a licensing deal instead
Quora has very rich content, the stuff that make Google searches a lot more interesting. Google validated it is interested in the social search area with the $50 million acquisition of Aardvark. Quora in my eyes, would be a perfect fit for the same goal Google has but due to a different approach.

Google makes its money on specific types of searches, which are transactional searches — when you are looking to buy something (say a flight) as opposed to informational (like what’s the capital of Australia). But it’s always been the informational searches that drive usage of the Google search engine, as Google is a one-stop-shop for answers. Quora is like the structured blogging equivalent of Wikipedia, which is gold in the eyes of Google.

Which is why I believe they will go down the path of Twitter, which successfully played off both Google and Bing (Microsoft) with a licensing agreement to show Tweets in searches, a functionality that allowed the search engines to claim they were now “real time”. They will want to do this with Quora, because the questions on Quora mimic searches people make and the answers offer a treasure trove of curated answered by real people.

Conclusion
I could be wrong. Regardless, even if it doesn’t succeed like how I think it will, expect the startup to make a lot more noise in 2011 beyond the current cries of people saying this last week has seen a tipping point. The big blogs will continue to talk about it, and new journalists are now discovering it, only to compound my original complaint of lazy journalism.

That’s impressive and which will guarantee the noise through to 2011. That’s because all communication innovations tend to do so, and Quora is the new kid on the block that will drive that disruption.

Why blogs are turning into newspapers and Quora is the future of journalism

MG Siegler wrote a post following our exchange on Twitter. I called him out because for the second time that day, I had logged into Quora only to see minutes later a TechCrunch post being Tweeted that was rehashing the original Quora discussion. Is this the future of journalism?

Blogging 3.0
Siegler wrote an eloquent post expanding on my original jibe that he was practicing blogging 3.0 (I called it that as over the years Marshall Kirkpatrick would constantly joke Twitter is what paid his rent). Now don’t get me wrong: Quora is one of my favourite websites right now, and Siegler (as well as Kirkpatrick) are two of the more talented writers in the blogosphere. But it made me wonder: what’s the role of the journalist in the world, and by implication, the news blogger?

For the bloggers out there who receive bonuses by getting headlines on Techmeme — what’s stopping Gabe Rivera (Techmeme’s founder) from simply importing the RSS feed of Quora posts and having its human editors headline the best answer? As Siegler points out, he (worryingly) already has. Given Quora responses are like blog posts and get aggregated into a community wiki-like answer summary, I can’t see why this won’t become a new input source for Techmeme, completely bypassing the traditional blogs.

And while we are on the topic: Julian Assange of Wikileaks argues that they are pioneering a new form of journalism, which he recently argued in an editorial for The Australian, as “Scientific journalism“. Scientific because you can read the source of the material in its naked form or accompanying an article that discusses the source.

Source material is democratised
Journalists, it is said, are becoming curators of information. Siegler claims he has retrieved information from an obscure source, amplified it, which in turn will be broadcasted by a bigger publisher like CNN. But if Quora democratices the source gathering — it’s so obscure that everyone in Silicon Valley is on it, include billionaires like Steve Chase who founded AOL and Mark Zuckerberg of Facebook — what’s stopping me from “breaking” the apparent news? Or Rivera from doing a direct RSS import of the top answers, direct to his audience of thousands?

If the big blogs are traffic hungry that have them reliant on the aggregators like Techmeme to feed their pageviews….And if this trend to scientific journalism is being promoted, where journalistic bias adds colour to a source only if you want (rather then the bias being the source of your information consumption) — then one has to ponder. That the evolution of journalism will come not from changes in journalistic style, but by changes in technology — an evolution where every single one of us can talk openly about the world and in an applied way.

Siegler says this is business as usual for the bloggers, but I think it’s business as usual for the disruption technology is generating for the news making business. Disruption that will continue to favour those who tease out the source of news (like Quora, Twitter and Wikileaks has) and those who curate it into an efficient way to consume (like aggregators such as Techmeme, Google News and Digg).

The future of journalism resides with those that create the originating value: traffic or content
Before the Internet, newspapers were the sole source of information and so had an elevated role in society. Now they are being relegated to just one of the many sources of news; once considered a horror if they disappeared, they would not impact the world if they went bankrupt today (as there are plenty of online mastheads to replace their value). As social media technologies continue to be refined — where the participants curate the source material themselves — blogs will not disappear like how newspapers won’t disappear. But their position in the world is far from guaranteed, as the audience curation is being done better by the aggregators and the source material is now no longer proprietary to a journalist.

The new magazine

The Facebook homescreen is a remarkable thing. I just saw a video of a friend throwing food at birds; relatives taking pictures of themselves in a hot tub; a link to a mind-expanding article; and a status message that made me laugh. It made me think: the homescreen is the new magazine.

Sure, we can be simplistic with this and say lots of pictures and content makes thee a magazine. But what strikes me as fascinating is how much personal content is shared. People’s thoughts, insight into their lives, and the real-time autobiographical dictation by our “friends”. It makes me think of the fascination people have with celebrities, and how gossip magazines are some of the highest grossing of their kind. The same phenomenon is being exploited here — which is people want to know more about people they know. While with celebrities you could potentially say people do it due to a fixation on celebrity status and looks, I would argue the reason gossip magazines are so popular is due to the curiousity into the lives of people who are familiar. People would be equally fascinated with a magazine about celebrities as a magazine of their neighbours, if it was practical.

It’s almost like Facebook’s homescreen is the new media version of a publication. But of your friends. And like a glossy magazine. Of original content from otherwise hard-to-obtain situations.

Or more practically speaking, like a gossip magazine of your neighbours.

Unfollow people on Twitter: it’s good for you

Since my first Tweet in April 2007, I’ve been using the service in different ways. In that time, my career has changed; the people using it are now beyond the early-adopted tech crowd which dominated when I first started using it; and more significantly, Twitter has added new functionality that has changed the pattern of usage.

In other words, I’ve changed; the people around me have changed; and the service has changed. So with that in mind, I’m asking myself now how should I use Twitter now? It’s become a new communications paradigm, and so our personal evolution in using it is an interesting thing to consider for the future of communications.

What has Twitter become
Put simply, people and companies use it to connect with other people. Not only that, but its become a means to discover information and people. The discussions on it have allowed communities to emerge (and organise), trends to be noticed, and people to be identified. Its created the social melebrity – the term I give to the trend of “micro-celebrities” – and created a new avenue to the consultant (online self-promotion), researcher (uncovering trends and breaking information), and business development manager (discovery of opportunities), among others

What’s different about Twitter now
Twitter was implicitly designed to encourage a gaming of human psychology based on the number of followers you had. The more followers, the more perceived status an account had and by extension a person or company. This status created perceived influence and authority – which in some ways was true, but true or not is not the point: it was enough of a motivator to get people thinking constantly “how can I get more followers”, a brilliant state of mind from the perspective of a profit-making company benefiting from usage.

Several new features have since emerged, one of which is lists. Lists themselves have become another way Twitter, inc has been able to game its user-base as it implies a sense of status. But from a user point of view, its also become a great new way to track people stream’s, which at core is what Twitter is meant to be about.

Foe anyone that follows a lot of people, tracking every Tweet can be impossible. I now hover around the 500 mark of people that I ‘follow’, but the reality is, I don’t actually follow them in the true sense of the world: only in the off-chance I check-into Twitter to see what’s happening. ‘Following’ these days is not a reflection of my engagement with that person, but simply, my interest (once upon a time).

Thinking about value
With all the above in mind, let’s now answer the question of who should you follow. Should it be people you’re interested in following, like how it’s always been no? I say nope to that, and here’s why.

I get no benefit following someone who is not following me back, other than the initial notification someone gets that I’ve followed them (and which I know can be quite successful as a marketing tool). The value we get, is if they follow us back, is the fact we can directly message each other. And this has real value: I know people who are impossible to reach via email, myself included sometimes, because of email overload. But, if someone sends you a direct message via Twitter – it can come to you via email, IM and SMS. And the conciseness of the message makes the communication more direct and pointed (a benefit in itself). It’s an efficient way of reaching busy people.

On the other hand, there is a real cost following someone who doesn’t follow you back. If you have an account where you follow more people than follow you, you are considered a spam account in the eyes of other users. If you follow more than a certain amount of people – say a few hundred – then you are not considered (rightfully) engaged in that person. And let’s not forget the cost to your attention: you get more value out of the Twitter stream when you can consume more of it – meaning, the less accounts you follow, the more engaged you are.

So what’s my point? Unfollow people and start using lists. Don’t be gamed by the Twitter communications platform, and start thinking about what value it can provide to you in your life.

A billion dollar opportunity with video

When Google made an offer for On2, I was dumbfounded. I wrote to a friend working at Google the following:

Phat. But I’m confused. How does Google benefit by making the codec free? I understand Google’s open culture, but for 100million, really? They help the world, but what’s the incentive for Google? (Other than of course, controlling it).

The reply: “incentive = greater adoption of HTML 5 = apps are written for HTML 5 = apps can be monetized using Adsense”.

Interesting perspective from a smart Googler who had no real insider information. But no cigar.

Newsteevee posted a follow up article today on what Google is going to do with this technology, quoting the Free Software Foundation. What really made me get thinking was this (emphasis mine:

Google’s Open Source Programs Manager Chris DiBona had previously argued that Ogg Theora would need codec quality and encoding efficiency improvements before a site as big as YouTube could use it as its default video codec. The FSF now writes in its letter that it never agreed with these positions, but that Google must have faith in VP8 being a better codec if it invested its money in it (Google spent a total of about $133 million on ON2).

The open source advocacy group apparently realized that Google wouldn’t switch codecs from one day to another, which is why it suggests a number of smaller steps to make VP8 mainstream. “You could interest users with HD videos in free formats, for example, or aggressively invite users to upgrade their browsers (instead of upgrading Flash),” the letter reads, adding that this would eventually lead to users not bothering to install Flash on their computers.

Think about that for a second: video on the web finally becomes free for real and open, becoming a core infrastructure to the online world – but the default is crappy. Don’t like crappy? Well Mr and Ms consumer, if you want High Definition, you need to pay for a subscription to a premium codec by the already dominate Adobe or another rising star. Assuming you get the whole word watching video and only 1% convert – holy crap, isn’t that a brilliant business model?

Bono, the lead singer of the band U2 wrote in an op-ed piece in the New York Times the following recently:

The only thing protecting the movie and TV industries from the fate that has befallen music and indeed the newspaper business is the size of the files”

Simple but profound insight from the famed entertainer. So with this fairly obvious logic, why isn’t the movie industry (backed by Google and Apple) innovating business models in this area? Value comes from scarcity – and quality is the best way of doing it. The reason why box office sales and Blu-ray broke a record in 2009, is because the quality is worth the premium for consumers.

What’s the incentive for Google, to answer my own question? The return on investment to be associated with a default open technology that you give the option to upgrade to users, is a billion dollar business waiting to happen. Doing no evil to the world and securing future growth at the same time sounds like a Google business in the making,

One word explains the Google superbowl ad: Bing

Google, a company that used to pride itself on the fact it never had to advertise, put an ad in the mother-of-all advertising slots: during the Superbowl, the most expensive time you can advertise in television. And this was posted on the official Google blog by the CEO Eric Schmidt, a man that doesn’t all that often post to the company blog.

Why did it break tradition, with this cute emotional-brand-building ad? Because Google now has for the first time a real competitor, in the rising Bing – Microsoft’s rebranded search engine boosted by the $100 million Powerset acquisition. Bing’s search technology may still lag far behind, but it’s certainly ringing a bell on the marketing side and growing quite healthily as a result. And as well all know, the reason we search is less because we think it’s better technology, but more so because of the importance we place on the brand that we feel comfort in.

Google’s ad was cute. But capitalism is all about self-interest, and for the few million Google had to spend on this seemingly non-informative ad, what management are thinking is quite clear to me. That being, Google’s trying to revamp the emotional attachment we have with the world’s most loved brand. But more tellingly, from the very top, Google’s scared as hell and is now protecting what they know matters the most in the search engine wars: the emotional connection to a brand.

Facebook’s no longer a startup

Facebook pokeFacebook announced today that they became cash-flow positive in the last quarter. This is a big deal, and should be looked at in the broader context of the Internet’s development and the economy’s resurgence.

The difference between a start-up and a growth company
There are four stages in the life-cycle of a business: start-up, growth, maturity, and decline.

In tech, we tend to obsess over the “start-up” – a culture that idolises small, nimble teams innovating every day. Bu there is a natural consequence of getting better, bigger, and more dominant in a market – you become a big company. And big company’s can do a lot more (and less) than when they could as startup’s.

Without going too much into the difference between the cycles, it’s worth mentioning that a functional definition to differentiate a “startup” business from a “growth” business is its financial performance. Meaning, a startup can be one who has revenues and expenses – but the revenues don’t tend to cover the operating costs of a business. A growth business on the other hand, is experiencing the same craziness of a start-up – but is now self-supporting because its revenues can over its costs.

This makes a big difference in a company, lest of all longer term sustainability. When a business is cashflow negative, it risks going bankrupt and management’s attention can be distracted by attempts to raise money. But at least now with Facebook finally going cash-flow positive, it has one less thing to worry about and can now grow with a focus less on survival and more on dominance.

Cash register

Looking at history
Several years after the Dot Com bubble, I remember reading an article by a switched on journalist. He was talking about the sudden growth of Google, and how Google could potentially bring the tech industry back from the ashes. He was right.

Google has created a lot of innovative products, but its existence has had two very important impacts on the Internet’s development.

First of all, there was adsense – a innovative new concept in advertising that millions of websites around the world could participate in. Google provided the web a new revenue model that has supported millions of content creators, utility providers, and marketplaces powered by the Internet.

Secondly, Google created a new exit model. Startup’s now had a new hungry acquisition machine, giving startups more opportunities to get funded as Venture Capitalists no longer relied on an IPO to make their money – which had now been effectively killed thanks to the over-engineered requirements of Sarbanes Oxley.

Why Facebook going cashflow positive is a big deal
Facebook is doing what Google did, and it’s money and innovation will drive the industry to a new level. Better still, its long been regarded that technology is what helps economies achieve growth again, and so the growth of Facebook will not only see a rebuilding of the web economy but also of the American one. The multiplier effect of Facebook funding the ecosystem will be huge.

And just like Google, Facebook will likely be pioneering a new breed of advertising network that benefits the entire Internet. And even if it fails in doing that, its cash will at least fund the next hype cycle of the web.

So mark this day as when the nuclear winter has ended – it’s spring time boys and girls. We my not have a word like Web2.0 to describe the current state of the Internets evolution, but whatever its called, that era has now begun.