The Week in Geek – April 9, 2008
Muhammad Yunus on Tech, Profit, and the Poor
The Nobel prize winner speaks to Fortune about the opportunity for technology to positively impact the world’s poor. Yunus encourages firms to consider poor markets first, rather than adopting rich-tech for the world’s poor (a WiG post from last Fall pointed out how cheap mobile phones are empowering fishing and agrarian populations by helping them identify when to harvest & arrive at market). While Yunus remains skeptical of the profit motive, C.K. Prahalad’s new book “The Fortune at the Bottom of the Pyramid” argues that healthy profits (and doing good) can coincide with serving the needs of world’s poor. The opportunity is tremendous, as David Kirkpatrick points out in “Why TechStocks have a Glorious Future“. While there are more mobile phone accounts than people in Italy and Hong Kong, India, with just 166 million mobiles for 1.1 billion people, grew 84.5% last year. Indonesia mobile use is up 36% (of course, you’ll want to be Qualcomm & not Motorola) PC use will follow. And with that, Internet services. The $40 billion in worldwide Internet ad spending is still just 6.6% of the global ad spend, but is growing at 33%. Says Kirkpatrick: “It’s impossible to deny that you are seeing a historic transformation of the world’s population”.
Side Note: Yunnis was one of 25 visionaries recognized by the Tech Museum of Innovation this past year. In 2006, my Dept. Chair, Prof. Jim Gips, stood on the same stage (alongside Bill Gates) and was recognized as part of that year’s innovators for his pioneering work with EagleEyes.
Google Your Way to a Wacky Office
Includes Video: The Googleplex, Google’s headquarters in Mountain View, CA, is a geek playground, sporting 17 free gourmet cafeterias, a T-Rex skeleton in the courtyard, and Spaceship One model hanging from the lobby rafters. But the new Zurich office shows euro-Googlers have it goin’ on, too. Visit and you’ll see meeting ‘pods’ in the style of Swiss chalets and igloos, fireman poles between floors, a slide to the cafeteria, a library resembling an English country house complete with fireplace, and an aquarium where geeks can escape in a red foam bath and watch the fish. We’ve got several Europeans in this year’s MI021 – perhaps Zurich is calling? Also note: this Friday (April 11) will be “Google Day” at BC, with a several talks from an alum from our Cambridge office (9am, 10am, 1pm, and 2pm in Fulton 250). Students should arrive early.
Also – Google has begun offering developers access to its vast computing resources. The new Google Apps Engine will allow developers to write a web application in Python, upload it to the App Engine, and let it run. The first-gen service is meant to be administration-free, processor scaling and load balancing. There’s lots of talk about ‘cloud computing’ lately. IDG (via the NY Times) offers a quick crib sheet on what ‘cloud computing’ really means.
Apple’s Consumer Market Share Now 21%
Piper Jaffray analyst Gene Munster says that in the consumer PC market, Apple’s market share is up to 21% in the US and 10% worldwide. With the iPhone poised for a corporate invasion, will Macs share make headway in the boardroom, too?
iTunes #1 in Music
iTunes has sold 4 billion songs and has surpassed WalMart to be the US’s largest music retailer – online or off. The rundown: Apple = 19%, Wal-Mart (both online & off) = 15%, Best Buy = 13%, and Amazon (online & off) = 6%.
AdWars: Google’s Green Light
Google now owns DoubleClick, the display ad powerhouse that serves graphical ads on sites ranging from Sports Illustrated to MTV. While much of Google’s market share growth has come at the expense of display ads (whose share of online ads fell from 58% in 2001 to just 21% today), buying DoubleClick makes it kind of display ads, too. The combined Google / DoubleClick now controls 69% of the online ad market. Even if Microsoft & Yahoo came together, they’d still represent less than 22% of all online ads. Despite the market reach, DoubleClick’s revenues are likely under $200 million a drop in the bucket next to the $16 billion Google should rake in this year, but the graphical display ads DoubleClick serves may be key to reaching users who spend more time in social networks and are more likely to notice a banner than click and jump away via a text ad. While DoubleClick is known for observing user surfing patterns and targeting ads across its network, Google has no plans to mix DoubleClick user data, which it says is the property of DoubleClick’s clients, with Google search and user data.
Out of Print
The New Yorker offers a stunning stat – the Huffington Post has an online readership that larger than all but eight newspaper sites. Newspapers are clearly dying. Independent, publicly traded newspapers have lost 42% of their market value in the past three years. McClatchy is down over 80%, the New York Times is down 54%. The Washington Post has saved itself largely due to diversification into areas like Kaplan Test Prep. Even among those sites that have created thriving web groups, revenue doesn’t come close to offsetting ‘dead tree’ losses. And in a world where China-growth sucks up resources, there’s no sign that rising ink, print, and distribution costs will level off. As early as 2004, Newspapers were ranked as the least preferred source of news among young people. To be sure, blogging doesn’t replace the foreign bureau, but blogger influence is on the rise. Talking Points Memo won a Polk award for its tenacious coverage of the US Attorney scandal – one that eventually led to the resignation of Attorney General Alberto Gonzales. On the right, bloggers took down Dan Rather. And refugees of the MSM (mainstream media) are ending up in blogging outfits. The Huffington Post hired Thomas Edsall, a forty-year veteran of the Washington Post, while (the now-defunct Fortune Magazine-affiliate) Business 2.0’s Om Malik and Erick Schonfeld are now both full-time bloggers (Malik for his own GigaOm empire, Schofield co-edits TechCrunch). I gave a talk last week where newspaper execs were in the audience. When asked how they can survive I was at a loss. The short-to-mid-term future looks grim.
The DoubleClick deal shows how private equity firms hope their investments go. In 2005, Hellman & Friedman took DoubleClick private for $300 million. The $3.1 billion sale to Google (and the prior sale of two DoubleClick units for over $500 million) netted H&F over 10x. BusinessWeek’s cover story on the Freescale buyout (Motorola’s old chip unit) shows how ugly things can get when a buyout goes bad. Freescale’s price tag was $17.6 billion, then the biggest tech buyout ever. Very risk when the brutal chip business can see 25% sales swings in a single year. Freescale sales are down 10%, and more doubts linger as Motorola splits off the weakening phone unit (a big Freescale customer). Freescale is burdened with $9.5 billion in debt to pay for the deal, and the firm must come up with $375 million in interest payments every six months. Freescale’s junk-debt now trades for as little as 69 cents on the dollar. Staying competitive in this industry is also expensive, and it’s not clear where this coin will come from. To stay current the firm says it’ll need to spend $1.2 billion on R&D and $400 million for capital expenditures each year. It’s got $1.2 billion in cash on hand, but wont book orders on next-gen mobile phone chips ‘til 2010. Looks like those finance guys could have used a few tech/strategy courses, and perhaps a bit more understanding of Business Exits.
VCs Adjust to More Competitors – Fewer Companies
As BCVC (Boston College Venture Competition) gears up for their annual business plan competition on Tuesday April 15th, Wired offers insight into the new VC reality. Last year looked solid for venture capitalists – VCs raised $35 billion in new funds, invested nearly $30 billion, and cashed in $53 billion. But angel investors are elbowing into early-stage companies. In 2006, angels invested $26 billion into 51,000 startups, up from $18 billion in 2003. Large firms are also buying startups – particularly Web 2.0 firms – before they call for a second or third funding round. The result? Deals are smaller & exits return less than the spectacular IPOs of years gone by. Battery Ventures Partner Roger Less is quoted as saying “The companies VCs are putting $500,000 into this year we might have been putting $20 million into in 2000“.
Lecture Notes Infringe on Copyright
Einstein’s Notes runs HowIgotAnA.com, a site that pays students to write down what professors say in class so that the notes can be re-sold to other students in advance of exams. But University of Florida Professor Michael Moulton, who teaches a course on “Wildlife Issues in the New Millennium” that’s cribbed by Einstein, claims the website infringes on the professor’s copyright. The courts have to decide if the service is ‘fair use’, or if it’s an illegal resale of ‘derivative works’.
Twitter as Early Warning Sign for Brands
TechCrunch’s Michael Arrington lost Internet access for 36 hours. Arrington, who runs the 2nd most popular blog, began Twittering about it. Says Arrington “Within 20 minutes of my first Twitter message I got a call from a Comcast executive in Philadelphia who wanted to know how he could help. He said he monitors Twitter and blogs to get an understanding of what people are saying about Comcast, and so he saw the discussion break out around my messages“. But it’s not just Twitter. Bloggers post faster than newsroom deadlines. User-generated Wikipedia entries often show up in the top three search results for major brands. And don’t get caught editing your own wiki pages or your firm’s credibility will be torpedoed. Has your firm considered these issues? Perhaps it’s time for a marketing-IS summit to set policy, response strategy, and pro-active engagement strategies. Even the Department of HHS is war-gaming how bloggers will respond in a flu pandemic. Like it or not, user-generated content will be a fire hose of rumor and fact, error and correction. Organizations ignore these trends at their peril!