October 2007 Archives

As Google approaches $700 a share, they are reported by the Wall Street Journal to be in "advanced talks" with the #2 and #3 wireless carriers in the U.S. As discussed here before, Google expects to create a new ecosystem around the Google phone - software development kits, handset OEM deals and multi-carrier availability. While Apple's iPhone initially did not come with an open API for third party development, the Google phone is expected to allow operating system access - thereby allowing developers to build additional phone features. Apple recently announced their iPhone SDK amid much enthusiasm from the developer community.

It remains to be seen how much Google will compromise to get handsets launched with the carriers. With this recent news the blogging community is taking the opportunity to throw Verizon under the bus - seeing them as crippling the Google phone. Originally, it was thought Google would release an open handset GSM device allowing customers to select the carrier of choice. Get your Google phone, insert your SIM and go - of course that is too simple! Most industry observers view an open handset as a long shot due to long standing stranglehold carriers have on devices. Apple moved the user experience in a new direction, but the carrier business model essentially stayed the same.  Advertising revenue from mobile phones is still small but the expectation is the market is growing and with the decline of voice revenue, carriers see it to build their top line revenue.For Google - the carriers want you, need you, just don't let them bleed you.

Hulu began to privately test their video service today according to the Wall Street Journal and the New York Times. The venture between NBC (owned by GE) and Fox (owned by News Corporation) seems counter-intuitive at first. So much so that when news about the venture came out six months ago, the critics and analysts were quick to point out flaws and pegged it to fail. How do competitors get together and create something valuable for their customers? Notably missing are Disney, Viacom, YouTube and CBS. Last minute deals were struck with Sony and MGM. The venture will provide legal television and film content online and through five distribution partners: Time Warner's AOL, Microsoft MSN, Comcast and Yahoo MySpace. Hulu is headed by Jason Kilar, from Amazon.com fame, who says the company only has to worry about the videos, not showing TV schedules or providing information about actors.  They will optimize the experience for viewing and interacting with the content. You can log in to hulu.com and register as a beta. You may have to wait a while to get an email invite.

AOL and MSN already have Hulu driven content up on their site. Although with AOL, you still have to use AOL's player so you don't get full screen mode or fast forward. NBC recently pulled their content from YouTube and iTunes in order to focus on Hulu as their primary vehicle. One of the more interesting features of Hulu is users can share television shows, select and cut clips from the shows and post it on their own blogs or websites. There are many promotional opportunities such as overlays and video player framing, and Hulu will have fewer commercials than the media company sites. Other community features include letting users view and comment on specific video clips thereby creating more buzz and interaction with a specific show. A big downside right now is Hulu will not display videos internationally; you get the error message "The requested video cannot be display in your region." Users from Canada, Australia, Brazil, Europe and elsewhere have weighed in on Techcrunch and other sites complaining that big media still doesn't get the Internet. Despite the criticism, it looks like they scored with an innovative business model and if they can keep their costs in check; it has a good chance to succeed.

Microsoft beat out Google for a stake in the growing social networking company. The investment represents a $15 billion valuation which Greenspan would certainly think exemplifies "irrational exuberance."  With more advertising spend moving to the web, this opportunity represents a way to specifically target users based on their hobbies, favorite music, location, age and gender - just to name a few. According to eMarketing, the U.S. advertising market for social networking sites is forecasted to exceed $900 million this year. The deal for Microsoft is access to international expansion by Facebook where they will be able to influence more of how the model develops. According to ComScore Media Metrix, Facebook experienced over 129% growth in unique visitors year over year compared with only 23% on MySpace. Microsoft has struggled with their online investments over the last four years and this represents a way to energize that group. Here's where the social networking sites have changed the traditional (if we can call it traditional now) online advertising model. Typically, users are presented banner and rich media ads depending on what they are doing on a web page or results from a search query.

Google adwords have led the charge and this is a very profitable business model today. Customers search for things, ads are presented, click-through happens and the online cash register rings. On social networking sites the user's purchase decision has nothing to do with search. It has to do with what their affinity group is doing, what their friends are recommending and other online discussion about the goods and services being consumed by their social network. Both Google and Microsoft are at a strategic disadvantage here. I will analyze this more thoroughly later. This investment is also overshadowed by a competitive war between Google and Microsoft. Google has stepped up its investment and expansion in office productivity applications offered as a service and Microsoft has stepped up their online advertising business. Ballmer was asked about this at the Gartner conference. They are going after each other's core business. The companies in the middle, like Facebook, will not be collateral damage - they will change the way marketers think about online advertising.

I didn't get an invitation to the Web 2.0 summit this year; instead I got a nice email from "the team" to attend the upcoming event in Berlin or Japan. It would have been a chance to see Steve Ballmer, Marissa Mayer (from Google) and Mark Zuckerberg all in one place. The invitation would have given me the opportunity to spend the $3600 for a ticket. We'll gear up for next year. Zuckerberg was reported saying "it's almost wrapped up" when asked how his recent funding activity was going. Rupert Murdoch and Chris DeWolfe announced that they will be opening up MySpace to developers.

Facebook set the pace when they opened up their site back in April. Since then they have had 100,000 developers who have delivered 6,000 applications to their site. That's a lot of development, not to mention the programs or widgets that didn't make it. One open issue remains. Will MySpace allow the porting of their user data to other applications? As discussed before on this blog, the whole issue about how to federate personal information aka "social graph" is unresolved. Google and others are attempting to create standards. The recent announcement of online medical

repositories by Microsoft and Google is alarming to some privacy watchers. Google has created a health advisory council to give some street cred to their proposal. Personal information should always remain in control of the person, not the system. When you allow the signup process at a social networking site to access your personal phone book or email, you can undermine your own security. Some people have experienced receiving emails from people who were asked to join their network without remembering they invited them in the first place. Don't let the world enter your network without a "tickie."