The Week in Geek™ – Oct. 27, 2010
NOTE: I’ll be taking a break from regularly publishing the Week in Geek. I’m on sabbatical until January 2011, and am also nursing an arm injury. Fun/interesting articles will still be posted via Twitter @gallaugher (where I can post via iPhone and avoid excessive typing at an RSI-inducing keyboard).
Apple’s “Back to Mac” Event By The Numbers
Here’s a fun example illustrating Moore’s Law’s advance: When the MacBook Air debuted in ’08 (btw: our students were in the audience for launch), the cost of a 64GB solid state storage system (chip-based hard drive replacement) was $999. In ’10 Apple introduced a lighter, faster MacBook Air with that amount of solid state storage for $999 – that means an entire MacBook Air computer now sells for the cost of what the storage upgrade alone did just a little over two years ago. (At the high end, today’s $1599 MacBook Air gets you an even faster machine with a bigger screen & loaded with a quarter terabyte of solid state storage). Advantage of solid state? With no moving parts it should last longer, it’s faster, and the fanless computer sips power compared to hard drive machines. Apple is the world’s largest buyer of Flash RAM and the competitively-priced Air will make AAPL manufacturing even more of a flash vacuum. Some neat numbers from the WSJ-affiliated All Things D: show Mac sales are up 3x in 5 years – the switch to the Intel chip has effectively crushed switching costs for Windows users longing to go Mac but fearing a loss of apps. This year we’re seeing some 70% of new students arriving on campus with Macs. Along with the new MacBook Airs, Apple is introducing a new iLife suite is prepping a new OS X update (Lion), offers FaceTime on the Mac, and is offering an app store for Mac. Some suggest this effectively quickens the death of the optical disc, just as Apple’s elimination of the 3.25 inch drive sped the demise of the floppy years earlier. These developments may also have dealt a fatal blow to over-the-counter retail software sales. Direct-download apps are the future and pundits now think that Apple’s moves put a very heavy nail in the coffin of boxed media sales.
A Web Pioneer Profiles Users by Name
A must read with an absolutely fascinating interactive graphic. The U.S. has largely given online marketers an opportunity to self regulate. But evidence of misbehavior will almost certainly lead to more legislation. The WSJ shows how one firm may be stepping into ‘creepy’ territory, raising the specter of more regulation. While most online profiling firms can’t or won’t gather your name, RapLeaf, a San Francisco firm that operates extensively on social networks (and merits a brief mention in our Facebook Case), has done this. RapLeaf says it never discloses real names to its clients, and RapLeaf’s privacy policy says it won’t “collect or work with sensitive data on children, health or medical conditions, sexual preferences, financial account information or religious beliefs.” But the WSJ suggests RapLeaf offers some 400 segmentation categories including “household income range, age range, political leaning, and gender and age of children in the household, as well as interests in topics including religion, the Bible, gambling, tobacco, adult entertainment and get-rich-quick offers”. That’s a clear contradiction of the firm’s privacy policy. Any of this look ‘sensitive’ to you? Has a line crossed that’ll likely prompt legislation? Marketer beware. Just because one can collect and use data doesn’t mean that this is in the best long-term interest of the firm, its clients, or the industry.
By having a real names database, RapLeaf can link its data with additional databases such as voter-registration files, shopping histories, and real estate records. No biggie – others do this. But companies can also work with RapLeaf to match their e-mail addresses to provide additional information about the people on client lists (effectively matching names with behaviors across websites). A network of RapLeaf partner sites share e-mail addresses with the firm (it reportedly tracks 1 billion e-mail addresses) and install third-party RapLeaf cookies on browsers surfing their sites. Tred carefully RapLeaf. A decade ago when DoubleClick tried to use a network of catalog firms to link catalog buying with online surfing it almost sunk the company and the effort had to be scrapped (silver lining, the market is forgiving & DoubleClick is now part of Google). The WSJ also reports that RapLeaf’s scheme was transmitting Facebook & MySpace IDs that could be linked to real names, but that this hole has since been plugged. Recent data sharing violations also caused Facebook to suspend apps from Critter Island maker LOLapps.
Commentary: I really believe in the power of data-driven marketing and I think this tool (like most in the business toolkit) can be used for good or grief. The lesson for students and managers alike is that its incumbent on them to think deeply and broadly about how their actions and the actions of partners impact others and are perceived. There is a lot of outcry over privacy now – lots of spooky talk but very few harmful violations. But waiting for the latter to occur is unacceptable. Even firms considered to have strong privacy and consumer protection like Google have been caught in embarrassing recent gaffes, ranging from SpyFi (the drive by collection of passwords and other data) to the dismissal of an employee who was caught violating the firm’s strict data access provisions. Unregulated markets won’t remain so for long if mistakes continue to be made and bad apples create press fodder or, even worse, are harmfully negligent. 2010 manager, you’ve got great power but also great responsibility. Abuse the trust or make gaffes despite your good intentions (see this sidebar in the Google Case) and you should expect to lose the tool. Other tools you may find helpful: the WSJ’s “What They Know” interactive tool and the Privacy Rights Clearinghouse.
Facebook’s New Groups, Dashboards, and Downloads Explained
(Video Included) Privacy and control have been areas where Facebook has taken some lumps over the years, but a recent slew of announcements has tried to offer users more control. Our Facebook case suggests the firm has high switching costs. This continues to be true, but Facebook now allows you to, download your photos, videos, wall posts, messages – effectively everything you’ve shared on Facebook – into a single zip file. In theory this’d make migration away from Facebook easier. In practice you’d still have to convince everyone of value in your network to move with you. And it’s more likely that users now feel more comfortable dumping stuff in ‘locker Facebook’, knowing they can get it out if they want to (making the site even more valuable to users over time). A new dashboard also allows you to see which applications use data about you, the permissions you’ve granted those apps, and a detailed access log showing when this information was accessed. Nice move – transparency is key to allaying consumer concerns. Another problem: the average Facebook user has 130 friends and it’s a challenge identifying who you really want to ‘share’ with. While Facebook allows you to create lists (e.g. college buddies, work friends, relatives), only about 5% of users have used the feature. But math has come to the rescue. A new algorithm creates an index for each relationship, tracking which friends you are close with. Facebook can use this to suggest friend groups, and it can help you populate the groups you’ve created. The enclosed video from Facebook shows how groups give users control – a post to a sibling asking ‘how did you do on a test?’ can go just to the family group. Facebook has also rolled out group chat, e-mail style group messaging, and wiki-like group doc editing. Putting users in control and increasing transparency seems like spot-on smart moves. By the way: it may be interesting to watch the brief video of Zuckerberg and compare this to the portrayal in “The Social Network”. Those interested in the film may want to read this skewering by FastCompany that challenges the setup, truthfulness, and conclusions of the film. Also a great read.
Facebook’s Surprise
More on Facebook’s revenues: estimates suggest that self-service ads will account for at least half of the firm’s estimated $1.3 billion total ad revenue this year. As Technology Review states “that self-service ads account for at least half of Facebook’s total ad revenue, projected to be $1.3 billion this year.” That’s much more than most had predicted. Social Network ad spending is also on the rise (see graph from Technology Review at left). Self serve ads make up a massive chunk of Google’s $20 billion revenue, but Facebook ads are different – based not on search or keywords found in content on partner sites, but on data that Facebook’s users share with the site itself. The trust and intimacy users place in Facebook allows for very precise targeting. As one exec puts it, users effectively state “here’s my actual age; here’s my actual gender; here are my actual interests”. Facebook’s social ads can also mention the relationships their friends have with the brand, yielding far better results than ‘unaffiliated’ ads. In one example the appliance firm Subzero/Wolf saw a 500% increase in the number of people who volunteered to connect to it by “liking” the brand if ads contained mention of their friends some 113,000 had done so as of September. The article also points out flaws in the service such as married people seeing ads for dating sites (creepy). But it’ll get better. And if those results seem impressive today, realize that so far, these ads only appear on Facebook. Google snares about 40% of its revenue from ads running on partner-network websites (everyone from the New York Times to small-time bloggers). Imagine the possibilities if Facebook were to open its doors and offer a similar advertising network.
Facebook & Microsoft Battle Google with Bing Social Search
In our Facebook Case, we speculated that a Facebook/Bing alliance could offer something Google can’t – the ability to serve up searches not only from the web, but also from friend pages. Well it seems Microsoft (which has a 1.6% stake in the social networking firm and which has powered Facebook search results since ‘08) has now taken steps to tap Facebook for Bing results. Bing will now feature a Facebook “module” showing the content that a person’s Facebook friends have shared publicly about a search topic. You might see, for example if friends have “liked” movies, restaurants, or brands you’ve searched on. Yahoo’s Bing-powered search has also added Facebook features, including creating photo albums from Facebook. Facebook information becomes more valuable as users share more. To use a personal example, while planning a recent trip to Peru some of the most valuable insights I’d received were from information shared with a Facebook friend – a former student who had traveled there a few months before me. Facebook search surfaced the connection & a follow up offered kindly shared and highly valuable insight. Experiences like this have led some to suggest that social is the future of search. Financial terms aren’t disclosed, but for now no Facebook/Google partnership exists, leaving Bing with something Sergey and Larry don’t have. Stay tuned to see if this is enough to turn Googlers into Bingers.
Networks Block Google TV’s Web Access to Protect Themselves
Google TV is out. The remote for the Sony unit (pictured) is a beast. One review unflatteringly says that ‘flying a Cesna is easier’ (ouch). But Googlers are smart, iterative tinkerers and the platform will get better. More troubling is the future of the platform’s television streaming. ABC, CBS, and NBC have blocked Google TV’s ability to stream content. Networks receive billions from cable providers who pay to carry programming, and if users have an excuse to cut the cable cord, this revenue goes away. Networks also fear a disruption of television ad models (most shows streamed free online offer fewer ads and take in far less ad dollars than broadcast content). For those interested in buying a Google TV (count me in), here’s a quick rundown on the free content you can currently find. Mark Cuban offers an interesting take on all this. The billionaire who made coin in building and selling a streaming video business suggests that Google’s not attractive because revenue prospects aren’t known (networks are said to be paid per stream based on ads shown). Netflix, however, pays some sort of upfront guarantee for most of its streaming deals. Questionable revenue with Google vs. solid revenue via Netflix may make the latter a more attractive option. There’s no evidence that tight-fisted content providers are willing to pony up all their content to Reed Hasting’s firm, but Netflix has posted yet another blowout quarter with an additional stunning stat:
Netflix streaming consumes 20% of US Internet download throughput during weekday primetime hours. Yowza! Netflix posted record profits yet again, and SearchCloudComputing says that on revenue and profits Netflix is now “the largest commercial operation in the cloud”. And the firm is predicting that users will watch more movies and TV shows online in the fourth quarter than they will on DVD. Streaming is real and Netflix version is offered by Apple, Google, LG, Samsung, and just about everyone else. Comcast will fight giving up NBC/Uni content if that’d sacrifice its cable business, but if NFLX can figure out a way to make streaming lucrative to content providers who fear chord cutting, Netflix could come out on top. A complex battle worth watching and one that we’ll continue to update in our Netflix case.
Fortune’s 40 Under 40
Students considering what to study might find inspiration in Fortune’s 40 under 40. The list is loaded with young tech-industry pioneers. Four of the top five, six of the top ten are in tech, and all others heavily rely on technology. Something to think about: the last time you saw a young person on the cover of a business magazine, which industry were they in? Finance? Accounting? It’s almost always tech. Geek up, my friends!
WePay: The Anti-PayPal
And of course we can’t wait ‘til BC alums Rich Aberman & Bill Clerico (right) make the above list. The duo continue to get rave press, including this piece which appeared on the front page of CNN’s Money section earlier this month. There’s a killer quote from WePay investor & PayPal co-founder Max Levchin: “These guys showed up and said, ‘Hey, this is what PayPal doesn’t do well.’ And I said, ‘Yeah, I know’. The rest was establishing that these guys could do it better.” The WePay guys continue to stick it to the man (if the man is PayPal). TechCrunch covers a brilliant guerilla marketing stunt where founders froze $200 in 600 lbs of ice and toted it around the Moscone Center outside a PayPal conference, demonstrating how their giant competitor freezes cash of certain groups and is less attractive than the startup. Good luck, guys!