The Week in Geek – Nov. 3, 2006
Cyberposium
This year’s Cyberposium will feature Marissa Mayer, the Google VP who graced the covers of Newsweek a few weeks back. The event at HBS is heavily subsidized this year, with undergrad and the public invited. The Boston College MBA TechClub (led by my GA, Pete Monaghan) will host a panel for the seventh year straight on the blazing hot topic of tech in health care. I hope to see you there!
Amazon’s Risky Bet (plus podcast)
BusinessWeek’s Rob Hof, one of my favorite tech journalists, writes a great cover story on the ever-evolving Amazon.com. At $10.5 billion in sales Amazon dwarfs any warehousing Net retailer. But new businesses lines are blossoming and Amazon is leveraging its expertise to become a service firm that can manage ‘complexity’ for other businesses – everything from fulfillment to computing. Need warehousing? With “Fulfillment by Amazon”, Bezos will sell it to you for 45 cents / sq. foot / month. Need storage this month? That’ll be a dime / gig via a product called S3 (Simple Storage Service). How about computing power? You can pay just 10 cents for an hour’s worth of server time through Amazon’s EC2 (Elastic Computing Cloud). And Bezos will gladly play middleman – Amazon’s”Mechanical Turk’ service will broker deals between freelancers and firms that need humans to handle tasks that computing can’t, like transcription or photo editing – all for a 10% cut of the fee. Amazon handles e-commerce operations for biggies like Target, but tech service clients are also A-list. S3 customers include Microsoft and Linden Lab (parent of the wildly popular Second Life virtual world – see below). Startup photo site SmugMug claims Amazon’s tech saves it over half a million dollars a year. And although Toys R Us left Amazon this year, most firms are likely to feel some lock-in after using its services, a big benefit for Bezos. FBA also takes care of small entrepreneur-run businesses, for example, if someone was to look at getting into selling products through Amazon, they can do via FBA and perhaps also look at something similar to this Sophie Howard amazon review in order to follow a tried and tested method to making money through Amazon.
But the innovation comes at a price. Amazon is spending so much on tech & hiring that analysts expect ’06 profits to be cut in half. Operating margins are taking a beating, dropping to 4.1% vs. Wal-Mart’s 5.9% and (gasp) Barnes & Noble’s 5.4%. The firm’s stock has been cut in half this year, but it’s still expensive with a PE of 54 (by comparison, Google’s earnings blowout pushed its PE down to just 35). Yet there’s room for Amazon optimism: the firm is growing at a remarkable 25%, double its ’01 growth rate & ahead of e-commerce growth overall – more evidence of the Net scale dynamic where the big getting bigger, quicker. And face it, there’s no inventory-holding online retailer that rivals Amazon in product depth, breadth, scale, data, and brand – none! And these assets all are potentially strong strategic resources. The far flung approach sounds risky to some, but Bezos isn’t shy about chasing the future. He’s also backing space tourism venture Blue Origin.
Cingular Jumps on Mobile Music Bandwagon
Subscribers of Cingular (another Grad TechTrek stop) will soon be able to transfer music from Napster, Yahoo Music, and eMusic to their phones at no cost beyond that paid to the music services themselves. Subscription to XM Radio Mobile will be added on Nov. 6th. Next year, the firm plans to add an over-the-air downloading feature that will allow for the wireless purchase of music. In ’07 we’ll also almost certainly see a hyper-acceleration of pocket-convergence. The phone is the new the camera, radio, messaging device, calendar, map, and MP3 player. M-commerce breaks out.
Eons: MySpace for Baby Boomers (plus podcast)
Jeff Taylor, the manic, blimp-skiing founder of Monster.com, will return to BC in the coming weeks to talk about his new startup Eons, a social networking site for neo-geezers. Taylor and others sees the 77 million retiring baby boomers as a “silver tsunami” – a cash-rich yet (from a net perspective) underserved group looking for answers on ‘what to do next’. They’ll have over $1 trillion in spending power and – with life expectancy on the rise – more time to spend it. The site’s motto? “Let’s Live to 100 or Die Trying!” He’ll have to teach old dogs new tricks.
Young, Fearless, and Smart
While Gates & Dell started out when they were as old as my undergrads, it’s never been easier for a young person to launch a tech business. Amazon & others are willing to sell product cheap, tech tools like Ruby-on-Rails let geeks whip sites together in a jiffy. And would-be Bill & Mikes can turn offshore for inexpensive software development. Mobo, a restaurant ordering prepayment service using mobile phones, employs four software developers in South Africa. And Extreme Entrepreneurship Education and MyMPO’s Musicane leverage Indian geeks. The small guy can be global out of the box. CulturalConnect’s staff of 30 all work remotely, divided between the West Coast and the Midwest, with one in Israel. Looking for inspiration? Check out the BusinessWeek slideshow on the Cream of the Young Crop.
Why Facebook Matters
Although MySpace & Facebook are often compared, a survey of my students emphasizes that the two sites are quite different. Tech’s other great business journalist, David Kirkpatrick, recently got to the heart of these differences. Facebook is a more private / intimate online experience. The typical Facebook user can see less than half a percent of the site’s total user profiles. That is in stark contrast to MySpace, where everybody can see everyone else. Additional privacy tools keep things personal and Facebook users are so confident that their information is sequestered from intruders that more than a third post their cellphone numbers. This cuts down on the creepy “Dateline NBC” types that plague MySpace & chat rooms. More than 60% of Facebookers return at least daily, to see what friends are doing, send messages, upload photos, or edit profiles. The formats for Facebook are standardized, unlike the free-for-all on MySpace. Founder Mark Zuckerburg sees the site as a “utility” for the net-savvy generation, not just a place to create a vanity site. Businesses are able to use social media in order to boost their sales; it can pay to use something like Upleap, or an Upleap alternative in order to gain a larger following that will see content put out by brands and share it even further to create more leads.
Still, the site’s regional focus means it may never enjoy the break-out, hammer-lock network effect of a global exchange like eBay. And BusinessWeek wonders if the Facebook fad is peaking. ComScore data from September shows a 10% decline in the site’s unique visitors (now at 13.3 million). Still, page views rose 11% to 7.1 billion, from 6.5 billion in August. A huge gain that makes Facebook the seventh most heavily viewed site on the Web. We’ll see how the site expands as it allows high schoolers & the general public inside what was once for college students only. The key to leveraging ‘eyeballs’ is to either advertise, sell something, or use your site as a distribution channel that third-parties will pay for. The firm’s new content sharing services focus on the latter. Users can now ‘share’ content fed from mainstream sites like Barron’s, Sports Illustrated, Marketwatch, The New York Times, The Wall Street Journal, PhotoBucket, People, and The Onion. Will Zuckerberg’s site keep growing, or will he regret that he didn’t take the $800 million in Yahoo and Viacom coin that was allegedly offered earlier this year. Remember the old venture capital saying, Mark “Eat dinner when dinner is served”. Facebook followers can now get an inside scoop from a tell all, “Inside Facebook” written by one of the firm’s first engineers.
Most Lucrative Degrees for College Grads
For job seekers it’s the most lucrative market in 4 years for college grads. While BC studnetes earn much more than the numbers posted by CNN, it’s worth noting that IS tops list in growth & pay. Current students – get ‘geeked-up’ with the IS Concentration, and although the ’07 trips are booked, don’t forget TechTrek ’08!
A “Second Life” to Live (audio)
The Second Life online community has gotten a lot of press recently, and now it’s got its own reporter. Reuters’ newest foreign corrspondent, Adam Pasick, is stationed not abroad, but in Second Life, a parallel universe where more than 850,000 users don avatars to trade and interact. Former Gov. Mark Warner (D-VA) recently held a Q&A in Second Life. Ben Folds performed a concert there. And a growing number of companies are setting up shop in the virtual world, including Adidas, Reebok, American Apparel and Toyota. Reuters isn’t even the first media outlet to plant its flag; the BBC and CNet are also there. For the newbie, Wired offers a Travelers Guide to Second Life.
Diller Thinks Ask has the Answer
But is he nuts? He buys a firm for $1.85 billion, then changes the name of the brand, so what did he buy? Did they really pay that money for geeks, tech, & infrastructure? The Ask guys have been trumpeting their technology advantage, but Barry, all that stuff can be copied! You think Google & Microsoft are gonna let you get away with a few tech tricks if your twist on search gains even a little bit of traction? Maybe Ask can weave IAC properties into search results, but that depends on getting users – that requires distribution channels and so far Ask’s got nothing. It’s gonna cost Google $1 billion to land on Dell’s desktops, and that’s to counteract Microsoft’s killer distribution with Vista, MSN, Windows Mobile, IE, XBox, Office, etc. Looks like Ask’s got one uphill battle.
Intel Relentlessly Pushes Competitive Edge
As TechTrekkers prepare to visit Intel this January, it’s worth a look at a May ABC News profile on the rollout of “Fab 12”, one of the many Intel chip plants undergoing a multi-billion dollar face lift. Intel, which has spent $25.3 billion on new equipment over the past five years and is the world’s largest chip maker, also gets important competitive advantages from its uncontested role as manufacturing champion. This savvy is enabled by scale. Most chip makers are going ‘fabless’, outsourcing manufacturing to others. Even IBM struggles to keep its super-expensive fabs humming at a capacity that justifies their fixed costs. Under the recipe being rolled out at Fab 12, a chip’s average circuitry measures 65 nanometers, small enough to fit 100 transistors in the space of a single human blood cell. Within the next few months, Intel will leverage its “copy exactly” strategy to clone chip making techniques worldwide, so the majority of the firm’s processors will be made using the new process. Intel is manic about ‘copy exactly’, even duplicating the paint in the bathrooms. But the speed leveraged by the firm’s prowess puts Intel plants about 18 months ahead of its chief competitor, AMD, and up to five years ahead of other chip makers.
What’s Next for NetFlix?
Everybody wants to write off Reed Hastings’ firm, but so far Netflix hasn’t gotten the memo about its supposed extinction. On October 23, the company reported third quarter results that beat Wall Street estimates, with net income of $12.8 million on revenues of $256 million. The company plans to “significantly accelerate [its] spending on digital downloading in 2007 — from less than $10 million this year to more than $40 million next year.” Hastings promises a full briefing on plans within the next 90 days. With 41 warehouses scattered throughout the country, plus a sophisticated database matching service NetFlix is equal parts distribution & content company. Most of the studios have a financial interest in movie download services, such as MovieBeam, Movielink and CinemaNow, which on the surface suggests they’ll be unlikely to partner with NefFlix. But Hollywood has never been savvy about embracing next-gen technology, and firms are painfully aware that the ineptness of the music industry led to Apple’s monopoly power in the digital music space.
How iTunes Saved ‘The Office’
Speaking of video downloads, it looks like Apple saved NBC’s Emmy winning comedy, The Office. “I’m not sure that we’d still have the show on the air” without the iTunes boost, says Angela Bromstead, president of NBC Universal Television Studio. “… when it went on iTunes and really started taking off, that gave us another way to see the true potential other than just Nielsen. It just kind of happened at a great time.”
Microsoft Office Roundtable – An Answer to Costly Teleconferencing?
Microsoft LiveMeeting has lots of fans. Now comes word (and official photos) that Microsoft is testing a device to be released in ’07 that combines a surround cam with tabletop video conferencing. Plop the alien-looking device on a table and it offers wrap-around views of all participants. The system can also identify and spotlight the individual who is speaking so that one receives prominence in the conference while delivering one’s comments. Conference participants can share whiteboards, PowerPoint, and transfer files in one environment. At less than $3,000, it’s cheaper than two tickets to Bangalore. Slick.
Brightcove & YouTube: A Place for Both
More video news: last year’s BC Cyberposium panel featured serial-entrepreneur Jeremy Allaire as a panalist. His new startup Brightcove, officially launched last week. The Brightcove Network lets any content owner build their own commercial Internet TV channel, launch, syndicate, and distribute it on Brightcove.com The free service is monetized by a 50-50 split between Brightcove and the content creator on ad revenue, and a 70-30 split between the user and Brightcove on videos offered by the rights-holder for download off Brightcove. Meanwhile Google offers its first ‘Sponsored Video” debut, a return act from EepyBird, the guys who created the Bellagio-fountain like geisers using Mentos & Diet Coke. Most consider the original Diet Coke and Mentos video made by the pair to be more entertaining. It brought Eepy $35,000 when they posted that video on Revver. But Revver’s tale is a cautionary one – it’s revenue sharing model was easily copied by Google. Looks like the Revver guys (and their VCs) could have benefited from a tech strategy course at BC.
Torrent Site Operator Gets 5 Months in the Pokey
Online video has gone legit – so to would-be pirates, don’t do the crime if you can’t do the time. 23 year old Grant Stanley will spend the next 5 months in prison for running a BitTorrent aggregation site linked to pirated content. He was also fined $3,000 and will get a three year supervised release after he’s done with the gray-bar hotel. A NetFlix subscription would have been much cheaper.
Textbooks Enter the Digital Era
The textbook industry is at a crossroads. The average student textbook bill now exceeds $900 a year, but by some estimates over 50% of students are not buying all of the assigned books for college classes. The used book market craters second year revenues of current edition books, and some students are increasingly turning to gray market or illegal copies produced overseas. And several upstarts continue to challenge the old models. In January 2005 a Northeastern student started textbookrevolution.org, which links visitors to a variety of free college-level, digital textbooks on the Web. Freeload Press, run by former textbook publishers, provides students with downloads of free E-textbooks and study guides in courses such as business, math, and computer applications. The downloaded “books” are subsidized by advertising from companies like Kinko’s and Pure Vida Coffee that appears on the digital pages. Some faculty (like yours truly) have (so far) eschewed textbooks completely, offering their own content online. Richard McCray, a retired professor of astronomy at the University of Colorado, became so frustrated with the soaring cost of ‘dead-tree’ books that he and his colleagues wrote their own online texts. Even legislators are taking note. Seventeen states, such as Virginia and Connecticut, have recently proposed legislation to help curb the rising costs of books, including the requirement that schools post the international barcode number of each of the required texts so that students can comparison-shop online. A new Connecticut law also would require publishers to tell professors what the books cost before the professors assign their students to buy them.
This leads me to my next question – how do I make money off the 10+ years of well-received content I’ve produced for my courses? The AdSense that accompanies the WiG hasn’t brought in much yet & the e-mailed Week in Geeks are still ad-free. Should I migrate the WiG to an ad service? Should I do a trade book? A traditional textbook to go ‘mainstream’? Give it away for free in hopes that my ‘brand’ improves and consulting opportunities double? I welcome your thoughts.