The Week in Geek™ – Aug. 12, 2011 (v. 1.2 textbook is out!)
New Textbook Version is Out!
Version 1.2 of Information Systems: A Manager’s Guide to Harnessing Technology is out! Faculty & students should find the text and cases to be the most up-to-date courseware of its kind on the market. Key statistics have been refreshed, many examples have been updated, and new sidebars discuss recent developments such as Stuxnet and Cyberwar (Security Chapter), and Google Wallet (Google Chapter). As always, it’s free on the web and also available in low-cost print version. Contact Flat World Knowledge for details. And sincerest thanks to all of you who have adopted the text and shared with colleagues. Please continue to share with others. All the best!
March of the Tencent Penguins
Shenzhen-based Tencent may have a cute, winky penguin as a mascot, but the firm is a Goliath. Publicly traded Tencent is the largest Internet firm in China. It has a user base about as big as Facebook’s (in the 700 million range) and a market cap approaching $50 billion (Forbes says the firm’s co-founder & CEO Pony Ma is China’s 9th richest person). Tencent did $3 billion+ in revenue in ’10, and earned $1.2 billion in profit. The stock is also up 5,000% since it’s IPO in 2004. Flush with cash, they’re on the hunt. Acquisitions include a $400 million bounty paid for LA-based Riot Games (maker of the online game “League of Legends”), and they’re in greater-Boston, too (the Concord-based Tencent office even nabbed one of my former TechTrekkers as an intern). Last year Tencent invested $300 million in Russian investment firm Digital Sky Technologies, a company that has holdings in Zynga, Groupon, Facebook, and Twitter. Groupon is partnering with Tencent, Zynga is bringing its games to Tencent’s networks, and celebrities endorsing Tencent services include Chicago Bulls point guard Derrick Rose. Says Sequoia Capital’s Michael Moritz “If you are a Silicon Valley guy and you don’t have Tencent on your radar, you have to be deaf, dumb, and blind… They are extraordinarily thirsty and aggressive.”
The firm’s 11,400 employees oversee a stable of properties that include China’s popular QQ chat service, a host of games, the Q Coins virtual currency, a search engine, an e-commerce marketplace, a Twitter-like service (Tencent Weibo – pronounced “way-baw”) that has 200 million users (about Twitter’s numbers), and two social networks that combine for half a billion members – pengyou.com (Mandarin for friend) and youth-focused Qzone. Those are a lot of properties, but the bulk of earnings come from the sale of virtual goods.
Tencent rivals grumble that the firm doesn’t innovate, it just bullies its way into lucrative markets after others pioneer and show promise (“says one account, Tencent is never the first to “eat crab”—a localism meaning “try new things”). But Tencent’s success speaks for itself. Obvious success wasn’t always the case. In 2001, South African media group Naspers bought out Tencent investments made by IDG and the son of a Hong Kong billionaire. The $32 billion Naspers put in for a 47% share of Tencent is now worth over $16 billion,” making it one of the most profitable private equity investments of all time.” Another fun fact, many of the firm’s employees have adopted English nicknames. BusinessWeek states the company’s internal message boards are filled with posts from the likes of “Thunder”, “Fruity”, and “Neo”. If you find these handles online, be nice. They might soon be your boss.
Nathan Eagle: Global Mobile Workforce
Check out this video of the PopTech talk by MIT Prof. Nathan Eagle. Eagle is founder & CEO of txtEagle, a system that can compensate users for their input by offering them free mobile phone credits. The potential is big-impact powerful – one of Eagle’s test examples was soliciting real-time updates on blood supplies from field nurses in rural African hospitals. Initially there wasn’t much of an incentive – nurses were effectively taxed for texting blood bank status because their personal phone accounts were charged for airtime (and this can represent a sizable chunk of a rural nurse’s income). But Eagle’s system offered modest cell phone usage credits in exchange for nurse input, and the result was a huge spike in the response rate – Tech for Good in action! txtEagle has since built a compensation platform that’s integrated into the billing systems of 220 mobile phone operators in 80 countries, providing access to roughly 2.1 billion mobile phone users. Among the ideas is pay-per-survey market research that can help brands understand their next 2 billion consumers. Says Eagle, “This is a massive hammer & I’m still looking for nails.” Seems the venture community thinks those nails are out there – Eagle raised $8.5 million for the effort earlier this year.
Eagle’s talk also offers examples of how mobile phone data can inform development. For example, geotargeting usage patterns reveals how a previously silent population lives, and can inform things like the placement of sanitation infrastructure, schools, clinics, the organization of labor markets, and more. And as phones get smarter and cheaper, look for richer opportunities. There are 2x more people online in the so-called developing world than in industrialized nations, and cheap Android phones grease the wheels of commerce & opportunity. While it’s great that my students have Eagle in their own backyard, some of the most exciting innovation happening in emerging markets is led by locals. Forbes chronicles how mobile phones are transforming commerce in Africa (led by Kenya’s Safaricom and the M-Pesa effort), and Visa decided it needed some S. African innovation, plunking down $110 million for mobile financial services infrastructure provider, Fundamo. In roughly the last half decade or so, I’ve seen my American-born students go to work for Asian giants like India’s Infosys or China’s Tencent. It’s only a matter of time before firms from sub-Saharan Africa start recruiting on The Heights. I’ve got a lot to learn but am thrilled I’ll have a chance to learn more as I travel to Nairobi later this month.
When Patents Attack
This podcast from NPR’s This American Life exploring absurdities in the U.S. Patent system is fascinating, entertaining, and downright scary. Some background: most folks understand why we have patents. Inventors who come up with a “useful, novel, and non obvious” innovation should be able to protect their creation from being copied by a larger, better resourced giant that can steal an idea before the little guy can make a market. This kind of protection should be a catalyst for innovation. But drawing the line between something that should be protected and something that shouldn’t is up for big-time debate. I often share with my students some examples of the more ridiculous ideas that have previously received U.S. patents, including: a method for exercising a cat with a laser pointer, a method for swinging on a swing (awarded to a five year old), and a method for a comb-over (as a bald man myself I’d like to see them try to enforce that one). There’s even a patent on toast (U.S. Patent No. 6080436 – a thermal “Bread Refreshing Method”). But beyond cases of patent craziness, should business methods be patentable? For example, should Amazon.com have been awarded a patent for the one-click ordering method (portions of which have now been overturned)? Should software be patentable? Is it ‘just math’, or a resource-intense invention akin to biotech that needs legal protection to incentivize innovators?
This American Life’s broadcast takes us to the offices of Intellectual Ventures (IV), run by former Microsoft Chief Technical Officer Nathan Myhrvold (whose side projects include the high-tech $625 “Modern Cuisine” cookbook). Myhrvold’s firm has been accused of being a ‘patent troll’ – a firm that buys up patents, then exploits these rights not by innovating, but by demanding payment from others. Intellectual Ventures claims it helps foster innovation by protecting and providing value to the small-time innovator. But in tracking one of the ‘success stories’ IV pointed reporters to, This American Life uncovered some 1,300 shell companies owned by Intellectual Ventures, many of which were involved in aggressive patent litigation. The TAL reporters take us to a corridor of empty offices in East Texas (an area favorable to defenders in patent cases) where many of these shells are “headquartered”.
One of the problems with the current patent system is that issued patents seem to cover just about anything. As TAL says, if you’re a firm doing something online – you’re probably violating someone’s patents. So today many “tech companies use software patents as offensive and defensive tools to battle one another, or to make money, or both.” Is this defense of the little guy? A few months of patent litigation can sink a startup.
Moves involving some of the world’s largest tech firms underscore the amount of money brought to the patent war arms race. A recent auction of Nortel patents fetched some $4.5 billion – double what many were expecting. The winners were a consortium that included Apple, Microsoft, RIM, Sony, and Ericsson. An opposing bidder – Google. That $4.5 billion is a sunk cost that doesn’t make your product any better. Google may have missed out on Nortel’s patents, but it recently bought more than 1,000 patents from IBM, covering things such as systems and methods for Web-based querying, and ranking and retrieving documents. Google is also rumored to be in the hunt for InterDigital, a firm that holds many mobile patents (some $3-$10 of the cost of an iPhone goes to the firm), and which some speculate might fetch in excess of $5 billion.
And in an interesting back and forth (that shows the role social media is playing in legal battles), execs at Microsoft and Google have sparred over their patent bidding. Google claims the consortium is ganging up against the Android-powered powerhouse. But Microsoft execs have tweeted & blogged that the firm wasn’t excluded at all – it actually invited Google to be part of the consortium! Daring Fireball’s John Gruber asks: “How is Google’s argument here different than simply demanding that Apple, Microsoft, Oracle, et al should simply sit back and let Google do whatever it wants with Android, regardless of the patents they hold?” TechTrek friend Andy Kessler lists patent reform as one of the things the government can do to jump start job growth. Does congress have the will and ability to tackle reform? The health of our startup culture may depend on it.
Portrait of an Incubated Summer
It’s great to see the co-winner of the 2011 Boston College Venture Competition get some coverage from Inc. Magazine! As readers of the Week in Geek may already know, the venture formerly known as AddItUpp went on to gain admission to the fiercely competitive Highland Capital Partners program, Summer@Highland. Now renamed Jebbit, the pay-for-attention ad effort is the youngest team in Highland’s coast-to-coast mentorship effort (some Jebbit members were admitted to the program while just sophomores – the technical lead was a freshman). The teams in Summer@Highland get killer coaching, from rock-star partners (two are BC alums), execs in the firm’s A-list portfolio firms (we’ve got Eagles there, too), and others. If you’re an entrepreneur, be sure that Summer@Highland 2012 is on your radar.