What’s web 2.0 worth?

A flood of announcements this week from the web 2.0 wunderkinds. YouTube is striking all sorts of pioneering content-sharing arrangements with film and recording studios (making it what – a repackager of professionally made content?); eBay is talking about putting Skype on the market (before it becomes so ubiquitous it makes no money); and Facebook, the ever-so popular but probably quite poor social-networking website, is apparently turning down funding offers that value it at about US$4bn (founder Mark Zuckerberg reportedly thinks it’s worth US$5bn).

Anyone would think it’s 2000 all over again – not the depths of the “worst recession since the 1930s”, as we’re so often reminded.

Don’t get me wrong – I admire the innovation behind all of these companies. But I find it hard to understand how anyone can see a bright future for them unless there is a fundamental shift in the way consumers interact with the internet – that is, unless people start paying for usage.

Perhaps counter intuitively, given it’s the only one that customers do pay to use, Skype is the most likely to burn out. It’s quite literally becoming a victim of its own success, as the saying goes. People only pay Skype when they use it to call friends on mobile phones or old-fashioned landlines. So every time one of those Luddites signs up to the service, Skype is losing a potential source of revenue. Seeing it out promoting its new application for the iPhone is a bit like watching a lemming in a long preparation for its cliff jump.

The others, however, are still entirely dependent on revenue from advertising – a market that is shrinking in the throes of the current economic turmoil. Now I know that internet advertising is holding up better than more traditional forms, but YouTube, according to various pundits, is still loss-making, and Facebook might be, too. Mr Zuckerberg insists its financial position is sound, and turning down a generous offer of funding would suggest he’s not desperate. He might, on the other hand, just be deluded. And before rumours of his investment rebuff began to circulate, he’d been sniffing around the money trail like a frustrated bloodhound tracking an elusive scent.

What’s certainly the case is that many advertisers don’t like what they see from either company. Big brands have taken one look at some of the weirdness that gets posted on YouTube and decided they don’t want to be in the same data centre, let alone feature their logo on the same web page. Facebook’s efforts to lure advertisers have been similarly in vain – principally because advertisers so far have been largely ignored by the Facebook crowd.

I think the deal between studios and YouTube just shows that both are getting pretty desperate (and locking up the Pirate Bay four isn’t going to dramatically improve the fortunes of the record industry). And I think Mr Zuckerberg is a greedy fool if he’s valuing FaceBook at 25% more than some generous (and perhaps naïve) investors.

The potential solution to both companies’ problems is to start charging customers. They’re reluctant to do so, of course, because their core teens-to-twenties audience doesn’t have much disposable income and has grown up using the internet for nothing (apart from the cost of access).

But that’s actually pretty cowardly. If people value something enough, they’ll stump up a small amount to use it. Let’s see Mr Zuckerberg figure out how much his 200m customers are willing to spend, and then we’ll have a fair idea of what Facebook – and its ilk – might be worth.

Cloudy thinking

SaaS, cloud computing, virtualisation – few people in the real world know what these terms, so beloved of the IT industry, actually mean. But it seems a few CIOs could be a tad confused, too. At least, that is, according to a cover story in the September edition of Computer Business Review (CBR), a trade publication, which presents fundamentally conflicting views about the definition of cloud computing from two people in the business. One suggests it is no different from SaaS.

This ought to worry companies like Hewlett-Packard, which have staked much on the expectation that cloud computing will be the ‘next big thing’ in IT. Given the economic headwinds, companies need to know exactly what they’re spending their money on. Any confusion is likely to delay their investments even longer.

I picked up a copy of the excellent CBR at the IP’08/VM’08 show in Earl’s Court, London, and it turned out to be the highlight of my day. If fuzzy explanations are prevalent among some of the IT companies, then some cloudy judgement was on display here. Speaking as a journalist who’s been round the tradeshows circuit a few times, I firmly resent attending so-called ‘keynote presentations’ that amount to little more than elaborate sales pitches. If the likes of Avaya and Symantec can’t rise above this, they shouldn’t be invited to speak again.

Obviously, as a journalist, I’m looking for points of contention, but I would hope any diligent CIO would also want to see debate around the issues affecting the industry during a keynote session. He can get the sales pitch when he wanders around the exhibition floor.

That wasn’t the worst of it, though. To the deserved embarrassment of the conference organisers, a keynote presentation from Microsoft CEO Steve Ballmer, due to be beamed through on videolink, never happened (at least not when scheduled), owing to a technical fault. Sorry, but I can’t see anyone buying into these products if they fail to work at an event showcasing their brilliance. I’m sure I wasn’t the only one who was lured to Earl’s Court on the promise of Mr Ballmer’s contribution. I just hope his presentation – which was due to be recorded and screened earlier today (I missed it) – didn’t partly dwell on the wonders of videoconferencing.

Chrome-plated browsing

“You actually spend more time in your browser than you do in your car,”  Brian Rakowski, group product manager for Google’s browser project, told Reuters yesterday. If that’s really true, I had to take Google’s new baby out for a test drive. So, I’m using it as I type, flipping between tabs to pick up the graphic (left) and checking the general Chrome chatter.

Like most Google products, it’s clean and neat and somehow cuddly with its soft blue colours. It swept up my zillions of bookmarks, but I can’t find my RSS feeds. An attempt to chase these down through the help button was unsucessful. This glitch aside, there are two main improvements to browsing that Microsoft should study.

First, Chrome’s opening screen gives you a snapshot of all the sites you’ve recently visited so you can go right to your favourites and second, it prompts you as you type the name of the site you are going to, the way email programmes do with recipients’ names. Nice.

One of the Google video promos promises you more stability – that is, if you are doing your online banking on one tab and working on another, a crash on the bank site won’t slow down your labours one tab two. I’ve never had this problem with IE7 or Firefox so we’re back to cuddly, the missing RSS feeds and whether the quicker browsing tricks are enough to make me switch.

I suppose the thing that’s making me keep IE7 as my main motor for the time being was something unrelated to Chrome itself. It was a tick box under the download for Chrome. I nearly ticked it until I had a closer read. It said:

Optional: Help make Google Chrome better by automatically sending usage statistics and crash reports to Google.

Needless to say, I didn’t tick the box.  I think Google knows enough about me already.

Yahoo! is bleeding

Yahoo! is facing an unprecedented brain drain, according to an story in today’s Guardian newspaper, as employees defect to rivals or simply decide they’ve had enough.

The latest to leave is one of the struggling dotcom’s most recognisable faces, and his resignation letter is bound to keep him in the public eye for a good while longer. Stewart Butterfield (pictured), the founder of photo-sharing site Flickr, must have raised a few chuckles (although probably not from his Yahoo! bosses) by writing entirely from the perspective of a veteran tin-metal worker disillusioned at his employer’s loss of interest in its core business as it transforms into a much bigger industrial concern.

Amusing though the letter is, I’m not entirely sure what Mr Butterfield’s getting at. Yahoo! never really had a core business of which to speak – it started out as a jack-of-all-trades portal – and the Flickr site Mr Butterfield developed was always a fringe interest, as an article in this week’s Economist points out.

If it’s any consolation to Yahoo!, Google has also lost a few executives of late – and that can hardly be down to any disappointment in the company’s financial performance. The trouble with dotcommers is that many aren’t motivated by stock options and free dental care. They just want to work somewhere cool.

If you’re not an employer, there’s nothing necessarily wrong with that, you might think. Except, of course, when the financial community can’t distinguish between what’s ‘cool’ and what’s ‘commercially viable’. As we’ve seen before, that’s too often been the case.

iFanatics await …

Apple’s latest cult gathering gets underway in a few hours, at which – it is widely anticipated – high priest Steve Jobs will offer up a new version of the iPhone to his slavering acolytes. This time, however, any technical wizardry is likely to be overshadowed by details of the commercial arrangements.

The religious-like fervour stems from the expectation that the second-generation iPhone will work on third-generation (3G) mobile-phone networks. Dull as that might sound, it’s important to some because the first version could only connect to the internet on slower mobile networks, or using WiFi – a technology that isn’t readily available outside coffee shops, airports and five-star hotels (which probably suits some iPhone users just fine).

Cheerleaders for 3G – who naturally include the cash-splurging operators – have been singing the same ditty for the past few months: that the iPhone met with a disappointing reception in Europe (where it has sold just a few hundred thousand units since going on sale late last year) because of competition from other handsets that are ‘3G-capable’.

Pretty much piffle. Deutsche Telekom, France Telecom and Telefónica didn’t tell iPhone customers they were getting a 2G internet service. They sold the device as a ‘mobile broadband’ gadget, just as vendors of the new version will. Some technophiles might have held off buying an iPhone after reading the network specifications. But most did for one overriding reason: it’s too darn expensive.

Which brings us on to the rather more interesting aspects of the launch. First, as is already well known from the spate of press releases dispatched by new Apple partners over the last few weeks, exclusivity has gone out of the window. It seems there are few big operators left that aren’t going to be selling the iPhone.

Second, while the original partners were tied uncomfortably to Apple, the next batch appears to have been cut loose. Revenue-sharing agreements look like an endangered species. And as they dwindle, so will the high upfront costs attached to the device. Some operators may even discount the iPhone to zero to spur adoption.

That doesn’t, of course, mean the iPhone will be cheap (according to the Guardian newspaper, UK customers getting them for nothing will have to pay at least £75 a month in service costs). But it does show Apple trying a different tack. And, frankly, it has little choice. IDC data shows its share of the US smartphone market fell last quarter from 26% to just 19%, and it is well off hitting its target of 10m unit sales by the end of the year (it is thought to have sold around 5m so far).

So is the iPhone finally due to go mass-market? Personally, I think prices need to fall a lot more for that to happen. But Apple’s targets are actually pretty modest. Simply introducing the iPhone to new geographical markets will spark some uplift in sales.

A lot, of course, will be down to the operators. The iPhone has gained a reputation in existing markets of being a luxury toy for wide boys and geeks. Altering that perception will take some clever marketing.

Microsoft, Google and the five and dime principle

In all the he-said, she-said aftermath of the failed Microsoft bid for Yahoo!, all parties are unanimous about one thing. Google was the reason the bid was launched and Google was the reason it failed. Microsoft needed Yahoo! to compete against Google in the online world. But Google managed to spoil the deal by offering to share some of its advertising skill with Yahoo! This gave its board the confidence to hang on for a better price. 

In an interesting New York Times article on the deal’s collapse, the author muses that about the search giant’s influence:

(Google’s) economic power is still derived largely from a simple, seemingly prosaic business: the ability to place interesting text advertisements in front of people when they do searches. Advertisers pay for those ads – sometimes $1 or less – only when users click on them. In a sense, Google has built a highly profitabley$16.6bn empire a dollar at a time.

This comment made me think of the five and dime stores which sprang up in the US in the era before the shopping mall. The five and dime, in essence, would stock anything that would sell for a nickel or a dime. And on that basis, customers streamed in, finding themselves irresistably drawn to items that were affordable, attractive and cheap. The concept became the basis of 20th century mass-market retailing, later up-dated by Sam Walton into Wal-Mart, the world’s biggest retailer.

With the internet fast becoming the retailer of choice for more and more consumers, Google is today’s five and dime. And the moral here is that Microsoft needs to start thinking like Sam Walton if it wants to outsmart Google at its own game. And here’s a message for the Microsoft board: Walton didn’t get rich by taking over other companies.

 

The Oracle

While not exactly blue skies, there was a distinct lack of storm clouds in Oracle’s third quarter results released this week. True, the company came in at the low end of its own expectations, saying that software licensing revenues were up 16% for the quarter ended in February. It had been hoping for a jump of between 15-25%.

But Oracle’s recent acquisition strategy is providing a nice updraft. With a much stronger application software than IBM - and a wider middleware line-up than SAP - Oracle is now the only company other than Microsoft able to sell a full “stack” of software to corporate customers.

The results speak for themselves - new database and middleware licenses were up 20% in the quarter. And overall, Oracle took in $1.3bn in net income, an increase of 30%, on revenues which grew 21% to $5.3bn. The company’s CFO says that its taking more time to close deals these days but predicts that current quarter will see sales growth of 10-20%. 

If the US is on the brink of recession, maybe someone should tell the folks at Oracle?

Google Babel?

Following our post about suicide seats, a reader has written in with the following Google translation (from French) for the description of a children’s camp in Normandy:

Clubs of horse, clubs of veils, clubs of veils with tanks and covered and discovered pools. It, being in Normandy, also has a Museum of Unloading.

Who needs YouTube when you can have this much fun clicking on Google’s translation tools? Definitions for a Museum of Unloading (and why it should be in Normandy) gratefully received – or other similar Google Babel offerings.

 

Web NG

Many music historians have grappled over Beethoven’s role in the evolution of western music – last of the classics, pioneer of the romantics? And so it is with Web 2.0. Did Amazon.com believe themselves two-point-oh when asking consumers to review their products online? Did the folks at imdb think they were futuristic when they first asked readers to vent spleen on the latest stinker at the box office? Were they being “Web 2.0″?

This is not a new debate on GTF. Amazon and imdb (along with countless MSN groups and yahoo chat rooms) surely started the Web 2.0 revolution before Mr. O’Reilly and co gave it a name. Web 2.0 coined, YouTube, Flickr and del.icio.us and other the 2.0-ers capitalised on the revolution, making a killing when Google and Yahoo! bought them. So, while businesses around the world are busily retro-fitting their online offerings with Web 2.0 gizmos, the smart money must be with the enterprising few who are already thinking about what comes next – Web 2.5, Web 3.0?

Web 3.0 has already been grabbed to mean something quite specific - take a look at Web 3.0 on Wikipedia.

Here at GTF, I’d like to coin Web NG for the next revolution. Web NG will arrive when web consumers can directly access the source data they need, manipulate it in the application of their choice, on the device they have to hand. What do you think the Next Generation will look like?

MergerTube

The corporate world’s adoption of web 2.0 initiatives is starting to roll. Check out the latest, Arcelor Mittal TV, a glitzy YouTube style web site which aims to give an upclose and personal view of the integration of this Euro 26.5bn mega merger.

Full marks for the look and feel of the site, which has been described as more Star Wars than corporate PR.

The site also boosts the cool quotient of the steel group as almost all the video clips have been posted on YouTube, not something most industrial giants can boast of. Still, there are risks to this kind of PR – a comment on one of the recent videos told viewers to check out a news clip from a local TV station on the health risks of living near one of the firm’s steel plants.