« June 2005 | Main | August 2005 »
July 30, 2005
Making Mobile Community Work
TelecomWeb did the first product review we’ve seen of Rabble, and it was good! The title is Joining the Rabble: Making Mobile Community Work. (I know, there is a subscription required. Sorry about that, but take a look at some of their other story headlines and you might consider buying a subscription. They go pretty deep on a lot of topics important to our industry.)
I don’t think they’ll mind a few excerpts:
"We've played with VCast and Sprint TV, every 3D game under the sun and more WAP pages than we can name. But the one recent application that has us coming back for more almost every time we log into our phone is Intercasting's new Rabble."
That was very flattering. Our users, while a smallish group at the moment, tell us the same thing. Let’s hope we can continue to rev the product in exciting new ways to make it even better over time.
"Rabble is among the most dense applications we've seen on a phone, with a lot of information packed into relatively quick downloads and small-screen real estate. Nevertheless, the interface is clean and navigable, and a great deal of thought has gone into how the interface can encourage and grow the community. For instance, when in someone's channel, you can see its subscribers and fans and then link to these like-minded Rabblers as well. This is a technique that helped make the wildly popular MySpace.com community site a place where people organically find and form communities based both on declared interests as well as common tastes in user-generated media."
It is exceedingly difficult to manage screen real estate when you are trying to create a robust mobile application. There is a fundamental difference between the web and the mobile space that has to be recognized before you start developing a mobile application. This is the age of the single-purpose application. Any web-based portal looking to put their offering on mobile devices will have a difficult time doing so, simply because you don’t have 18 inches of screen real estate to work with. Along the same lines, key clicks matter. It is often better to tab through multiple screens with the click of the same key rather than try to implement some sort of “point and click” scrolling browse function. What all of this means to us is that the user experience starts with simplicity, and everything Rabble does is geared toward giving the user what they bought the app for in the first place. I know that sounds obvious, but I have used many apps that do not seem to keep this in mind.
"Rabble is nudging user-generated media to the next level, where it starts seeing itself as media and not just glorified diary postings. By naming people's blogs "channels," Rabble is massaging the users' feeling that he or she is a "small media" maker, a programmer using the content of his or her own life or brain as a script. This is a compelling extension and realization of what the blog can be as both community and user-made media. The idea that individuals posting to the Web have "fans" and "subscribers" is itself a remarkable evolution of traditional passive media assumptions. It points to how interactivity, brought to its logical ends, disrupts old media-making and - consumption structures. In the Rabble world, we are both makers and consumers of media, star and fan, exhibitionist and voyeur."
I think this is a great point. If you look elsewhere on our site, you will see that our vision, while perhaps broad in scope, is in fact very narrow in focus: We want to reverse the flow of the Media stream. An LMNO can take many forms in a variety of verticals, but closest to our heart is the promise of populist media. It is too easy to pander to consumers. Consumption is something we all understand, but I feel like there is a certain mild disrespect of consumers by the incumbent media industry that assumes too much about our collective lack of intelligence. Do you know how foie gras is made? You force-feed a goose (it doesn’t matter with what – grain, wheat, figs are all fine – just use whatever is cheapest) then later eat its oversized (and delicious) liver. As a consumer, I feel like the media industry sees us as geese, and indeed it seems at times that there is no limit to our ability to consume media, and quality clearly does not matter much. Your delicious liver is of course your wallet. Of course, there is absolutely nothing wrong with it, in my opinion. It just seems very one-way to me.
When a billion people are walking around with media production devices, things will be different. Yes, we will always consume, but I think we will also collectively produce more than we consume. That is when things get really interesting to me, because when you are creating and consuming at the same time that is media interactivity. I don’t mean the kind of interactivity that lets you use your remote control to freeze your TV screen, zoom and buy whatever outfit the reality show star is wearing. (Though that would be pretty cool.) I am talking about full media immersion where you are the creator of the content as much as the consumer of it, where media is no longer about following a narrative and is instead about participating in the construction of the set design and the direction of the players in a story that has no script, no beginning and no end.
"There are burps to Rabble, of course. In a bizarre move that suggests Verizon Wireless doesn't understand the application it is hosting, Rabble has slipped into a Messaging/IM sub-menu of the deck, where it is difficult to find in the first place. Pieces of the interface remain kludgy. Uploading images to a blog entry failed for us, in part because it required that we e-mail a cam image from the phone gallery to ourselves at a Rabble.com e-mail address. This didn't work for us, and we were frustrated to find that the Rabble.com Web site is not yet equipped to manage a mobile blog or its gallery."
We're getting there. I am going to talk to the Verizon guys to see if we can try a different category. There just isn’t any logical category to put a mobile blogging/social networking/user-generated content production and consumption community application at the moment. Also, I’ll admit that despite our pretty good UI, it is kludgy in areas, but this is 1.0 and our growing community is definitely comprised of younger early adopters who have been great at providing us very useful feedback.
We aspire to 3.1 status, which we learned from Microsoft: Windows 1.0, launched back in the mid-‘80’s was a complete flop on which they actually lost money. It was sort of a front-end to MS-DOS that actually made DOS harder to use and less robust. Windows 2.0, released in 1987, while an improvement, you will remember was limited to 640k of memory and was also unsuccessful. Still they stayed at it. In 1990, they released Windows 3.0, which I remember had better multitasking and could use up to 16mb of RAM, was an improvement but frankly IBM’s graphical OS/2 was a superior product. 3.0 sales were good, and Microsoft hyped the release in a big way, but it was still inferior to IBM’s product and even their own MS-DOS 5.0, though they were on their way. Then in 1992, they shipped Windows 3.1, which was the first obvious mainstream commercial success in the Windows line and was the precursor to Windows 95, which was the first time they packaged both the OS (MS-DOS) and the GUI (Windows) together and the rest is history.
I don’t do the actual full history justice, of course. I just lived through it and bought every Microsoft product from MS-DOS 1.0. Along the way I saw them learning from each release and noticed that the things I would curse about a particular version of Windows would be fixed in the next release. They stuck with it for 10 years to build a true mainstream success. If they hadn’t started with 1.0 and instead tried to build 3.1 from the beginning, they never would have been successful because the market has to teach you what to build next.
Today Windows is so robust and intuitive that it feels transparently magic to me. Remember having to configure that SLIP/PPP bullshit with your external dial-up modem and having to maintain a list of local access numbers each with different access codes depending on the provider? That wasn’t that long ago. Now I walk into a Starbucks and my computer asks if I would like to wirelessly connect to the internets. Why, yes I would. Thank you. And they seem to have killed that damn anthropomorphized paperclip, a move which deserved it’s own release number, in my opinion.
Anyway. 3.1 is where we’re going, though I don’t intend for it to take 10 years to get there! So far people seem to really like Rabble, and we have many improvements planned for the next release that will hopefully make everyone like it even more. Don't you think you should buy Rabble now and be all O.G. when we get to 3.1? I would appreciate the feedback. ;-)
Posted by Shawn Conahan at 10:52 AM | Comments (0)
July 29, 2005
More on InfoSpace
Analysts Sending Me Emails, Read This:
Here are my answers to the four questions I am consistently getting from various financial analysts:
Yes, there really is seasonality in the ringtone business. It is lowest in the 2nd and 3rd quarter. In fact, ask any mobile content provider or network operator and they will tell you that the holiday shopping season, when the majority of net adds occur, represent a seasonal uptick in revenue across the board. (You get a new phone and you buy a new ringtone, game or whatever.) Those of you who translated "seasonality" from the prior earnings call dubiously should verify that this is the case, because it is true for all companies in this space.
Yes, I do think the existing management team is strong enough to "pull it off." (As if my opinion matters.) Have you read Kathy Rae's bio? She ran an airline, for crying out loud. Is there a more difficult job on earth? This is a world-class management team comprised of people who know how to increase shareholder value. Are you really so unimpressed with what they have pulled off thus far?
My vision for InfoSpace? It is not my company, so it really doesn't matter what my vision is. My previous post was from the perspective of an objective observer. I hope I made it clear that I am literally just perplexed about the street responding the way they did to what wasn't such bad news. I'll reiterate: Look at the fundamentals again and compare them to other comps. It just doesn't make sense. Now look at the assets they have and see if you arrive at the same conclusion about the brightness of their future. This stock should be trading well above where it is. I have no vested interest, either. My defensive position of INSP is based on their numbers and their future opportunity in this space. The stock was well priced last week. Today it is an absolute bargain.
Oh, btw, I am an ass: Jim did recently provide guidance on mobile search. In March he called it their Holy Grail. That's a strong statement and fairly lame of me to miss.
Yes, I do really think InfoSpace could beat AOL, Yahoo and Google at mobile local search. These are all incredibly impressive companies, but InfoSpace is still months ahead of them in this area, maybe a year. Do not underestimate the importance of mobile domain expertise.
Finally, I will say again that this is the very kind of skepticism that I think is totally unwarranted for such an important company in this space. I respectfully suggest you stop blamestorming and take a long view not only on this company but on the mobile content space in general. I'll make you a deal - if the 4th quarter really does reflect an uptick in revenue (within the context of the current guidance) and they do launch a mobile local search product by March 2006 as Jim previously said they would, you have to tell your clients to replace the 30% you just sucked out of the stock for no reason. Sound fair?
Posted by Shawn Conahan at 10:26 AM | Comments (4)
July 28, 2005
About InfoSpace
This Stock Price Does Not Reflect Their Opportunity
INSP just plunged 30% to a new 52-week low of 24 and change on lower than expected guidance for the year. Sounds pretty bad, but don’t be too quick to judge. I would point out that before Jim Voelker there was Naveen Jain, who had taken the stock down to a near delisting. Things could be a lot worse, and it’s not like the business is in the toilet – it is growing respectably. I have always thought INSP is just one of those ultra-volatile stocks that the street hates mostly because of history. After Naveen made his “we’re going to have a trillion-dollar market cap” statement then proceeded to tank the company but still emerge a billionaire, I think the legions of daytraders who lost their asses still feel compelled to punish them for anything less than stellar results.
I will point out that in the mobile space, JMDT is trading at a P/E of 101 and EPS is .29 and in the search space, GOOG is trading at a P/E of 87 and has roughly the same EPS as INSP at 3 and change. Compare these comps to INSP’s 6.4 P/E. INSP is trading at 2.79x, whereas JMDT is trading at 16.12! This with a profit margin around 8.4 vs. INSP’s 48!
It is absolutely ridiculous to me that this company should have less than a 3x multiple. With more than $300 million in the bank still, it just doesn’t make sense even given the guidance for the year. Nevertheless, the guidance is softer than what analysts would have liked to have seen.
I would like to explain why I think this is happening and what should have and still can be done about it. This is bad enough for InfoSpace shareholders and employees with stock options who just saw their value evaporate, but I would like to explain why I think it is really really bad for our industry and why it has much deeper implications.
The Importance of Ringtone Revenue
I was previously president of Moviso, a successful ringtone company that was sold to InfoSpace in late 2003. The success of the subsequent hockey-stick revenue growth from Moviso (now InfoSpace Mobile) was largely responsible for propelling INSP upward. But the revenue model we built for Moviso was a series of overlapping S-curves with decreasing margins over time. Imagine three growth curves for ringtones: monophonics, polyphonics and what we tried to get the industry to call “TruTones” or songtones or whatever you want to call them.
Monophonics cost a dollar to consumers and we paid a licensing fee of about $.10. That’s a pretty healthy gross margin. (We also paid a distribution and billing fee to the carriers at various rates, but that is probably confidential information to InfoSpace, though I doubt that it has stayed the same.) But monophonic handsets were quickly being replaced by polyphonic handsets, so the expected lifespan of that revenue curve was predictably short, but overlapping it and exceeding it over time was the polyphonic revenue curve. This was the sweet spot of the market because we still had to pay only about 10% to publishers for a mechanical license but polyphonic ringtone pricing was generally higher, so now we could sell a ringtone for $1.99 and still only pay $.20 or so, dramatically increasing margins. To make things even better, this was happening at a time when ringtone sales were increasing at an increasing rate. So that revenue curve, while it still had a sunset, was much longer. We knew the next big thing would be TruTones, so we added that to the model, intersecting polyphonics the same way polyphonics intersected monophonics. Here’s the problem with TruTones: You have to pay the publishers the same rate previously mentioned, but then you also have to pay the record labels, and they didn’t just want parity with publishing, they wanted HALF of gross. So the margins go through the floor, but you still make a profit – you just have to sell them for more ($2.99, which starts to limit your market) and dramatically increase volume.
To InfoSpace’s great benefit, the ringtone business became a faucet of money that was impossible to turn off. Now maybe it is waning a bit. Why? Competition in a commodity market. As the owners of the intellectual property rights upon which ringtones are based become more sophisticated, the companies that make money as middlemen become marginalized and a more direct relationship between content and distribution renders the middle-of-the-value-chain technology transparent or even irrelevant.
If you look at InfoSpace Mobile’s fundamentals, the basic economics of their core mobile offering, ringtones, had a lot to do with last year’s nice ride but also with getting them to where they are now. Frankly, they should have seen it coming. Which brings us to...
The Importance of Vision
All product-driven businesses have a similar series of curves in their projections – no one product revenue line can keep going up forever. So the most important thing you can do is to continue to diversify and invest in new products that will continue to capture market share. At the time of the Moviso acquisition, the mobile division of InfoSpace was run by someone with an engineering background, Kendra Vandermeulen.
This was a critical point in history for InfoSpace.
They had a low-margin but highly defensible service business built around infrastructure that they sold to network operators. With the acquisition of Moviso, they had the opportunity to turn their business into a high-margin but hit-driven product business built around entertainment.
They had to choose one option and do it very well. Instead, they chose to sort of do both as well as possible, and that was their biggest mistake, in my opinion.
About a year after the acquisition of Moviso, Kendra separated from InfoSpace (around October of 2004) and no successor was publicly announced. Taking the position internally was one of the nicest and most professional guys I have ever met in business – Steve Elfman. Steve is apparently a fair and seasoned manager, but my experience with him was so brief that I cannot comment on his vision. What I can say objectively is that I have never seen any press release from an InfoSpace senior executive apparently in charge of the mobile division stating any kind of compelling vision. Since Kendra’s departure, InfoSpace has been looking for a more media-focused leader for the mobile division from the entertainment space. Finding the right person can take a long time, but it is now mid-2005. That’s a very long time.
I know there is management in the mobile division, and it is strong. But what is the vision? My mental image of the current financials is that they got to the end of the last overlapping revenue S-curve provided by Moviso and didn’t add several more upward-moving curves and that is what is affecting guidance now. If someone would depict the vision for InfoSpace Mobile translated into a series of overlapping upward-trending revenue curves, I would have great confidence in the financial future of INSP.
You will know there is a turnaround at InfoSpace when Jim makes the following bold statement: “Nobody understands local directory search like InfoSpace, and nobody can bring it to the mobile consumer like InfoSpace. Google? Yahoo? Morons compared to us. With our extensive assets in this area combined with our deep reach into the worldwide mobile space, we are well positioned to be the market leader in this burgeoning multi-billion market. As the lines are blurred between the web and mobile worlds, we will leapfrog ahead of the competition by tightly integrating our media assets with our local search and directory business to create a powerhouse media experience that gives consumers value that nobody else can give them. Let me be crystal clear about our vision: Mobile Search and Directory is the future, and it belongs to us.”
Now that would invigorate analysts, shareholders, employees, reporters and consumers. This statement could have easily been made in late 2003, and they could have been off and running over a year ago with a truly compelling consumer offering that really would have kicked some serious ass. Only today is AOL announcing something along the same lines.
Whatever. I don’t think it is too late, but I really would like to see some clear trailblazing vision rather than a fast-following mentality that has them buying game companies occasionally and watching their market share erode to competitors along with their margins on products that have not really been refreshed in years. There are some smart people there – I wish them all luck and I am sure that Jim will pull it off.
The Importance of Role Models
The real story here hasn’t been written yet. Look at what is happening in the mobile space today. A lot of value is about to be created on the backs of investors confident that the mobile space is a hot growth area. Mforma is gearing up for an IPO, For-Side is on an acquisition spree for the same reason, WiderThan has strong fundamentals and now has a toe-hold in the North American market and they have plans for an IPO. M&A is heating up, too. You can’t swing a dead cat in this industry without hitting a VC planning a roll-up of small companies with run rates in the $1mm - $2mm range.
There are precious few currently publicly-traded players in the mobile space in North America, and everyone is watching them. I think JMDT is going to beat the street on their earnings call on August 11. Is that stock too hot? Is the multiple too high? Dunno. But I do know that INSP isn’t hot enough, given it’s performance, and the multiple is too low given their leadership position. When institutional investors look at the newcomers on their roadshows, they will be looking at two primary comps: INSP and JMDT.
What conclusion would you draw? Is it as simple as “games look hot, ringtones look dead, and infrastructure kills your margins”? Because all of the would-be newcomers are basically roll-ups, they look more like INSP, which has their finger in a little of everything and less like JMDT which is basically a pure play. The implication is that analysts, with little else to go on, will draw conclusions based on the comps they see now. And if they draw the same conclusions they are drawing now about the future of INSP, what conclusions will they draw about more entrants to the space? Will it look dilutive to the overall opportunity? The worst thing that can happen is that analysts look at the performance of the precious few companies that are currently publicly traded and they yawn at the prospect of new entrants into the space. It could mean the difference of billions of dollars of shareholder value if the mobile opportunity is not correctly perceived.
Keep this in mind: We are barely at 1.0 of the opportunity in the mobile space. The biggest native brand our industry has in consumer applications is JAMDAT Bowling. Think about that. (Yes, it’s very fun - you should buy it.) But we haven’t seen our industry’s EBAY, YAHOO!, GOOGLE or AMAZON. Those brands were built in their space for their space. The mobile equivalents are right now on white boards and in pitch decks. To not understand the massive upside that companies like InfoSpace have at this stage in the game is myopic at best. To not understand that the future of mobility is so bright that there is room for a thousand more InfoSpaces could only be the perspective of someone who has not heard of the internet.
Posted by Shawn Conahan at 07:08 AM | Comments (7)
July 23, 2005
We Are Hiring In A Big Way
Things are going pretty well for us. We have been four full-time people for about a year and we have created a good amount of value. Now we have to expand the team, so we are looking to hire a few great people.
Mobile application development is not for the passive, not for the timid and not for the faint of heart. People who can do this know it is their sheer will that gets the job done. The few elite geeks who embrace the challenge know that you must have serious bawls to get through the day.
We are looking for 3 rock star hackers for core development, (including a senior developer/manager) 2 of the best scary ninja handset developers in the world for some exotic new apps, (think massively multiuser rich media) a ridiculously smart product manager, a caffeinated project manager and a few others in QA, customer support and business development.
Think about your current job. Do you currently work at a mobile application company that has become bloated with business people in blue shirts and khakis that have no vision or direction? Sad. You need a change. You should come work with us in San Diego. (Google for “72 degrees and sunny” and witness the top search result.)
If you are the best at what you do and want to work at a fast-moving startup with other smart people, we would like to talk to you. Glory, honor, a fun work environment and a competitive compensation package with more stock options than you have now are yours if you get the gig. Please send us your resume, a bio, or just a quick note explaining why you are a genius and kick so much ass.
Please click on the link that best describes your skill level:
Powerful you have become, the dark side I sense in you.
Never send a human to do a machine’s job.
All shall love me and despair.
Posted by Shawn Conahan at 12:55 PM | Comments (2)
July 21, 2005
Flipped To Last
Clarifying On My Last Post...
I got a few emails on my last post asking if it was a thinly-veiled attempt to signal to News Corp. that they should buy our platform. When I re-read it, I could understand why someone would think that since I stated that they should add mobility to their offering, and yes, I think our platform would fit. Frankly, we built our platform because it would fit with a great many companies as they turn themselves into LMNOs and we think our services, in a variety of capacities, will be valuable to them.
What I meant was that the media industry is moving inexorably in the direction of the LMNO and I think at some point in the future more companies will be adding mobility to their media strategies.
There is a confluence of trends creating a perfect storm that will change our definition of media: Distributed overlapping personal networks, mobile connected camcorders, high-speed wireless data, open networks, open devices, maturing social networking infrastructure, P2P distribution, unprecendented consumer choice and the power to participate in the set design of media rather than having to sit back passively and let the cable television wash over them all points to this conclusion. (Even if I am the only one who thinks so at the moment. ;-)
I want to completely change the media industry from:
- Low choice, low consumer involvement, manufactured, hit-driven, center-of-network oligopsony
To:
- Broad choice, consumer participative, organic, changeable, personal, edge-of-network populist media enablement
...all while disrupting the current media production and delivery paradigm to the benefit of the incumbent media companies which have much to gain by making this shift while at the same time convincing them that their fear of the future is unwarranted and helping them see that the path to greatness lies in embracing the massive change that technology will bring. (In the same way that the movie industry should have embraced the VCR, the music industry should have embraced the MP3 format and Kodak should have embraced digital photography.)
It is a pretty big vision, but you know – go big or go home. If you shoot for the stars and you fall short and only hit the sky, that's still pretty good considering all the good ideas that never get off the ground. My point is that there is a very long value chain that has to be strung together to create the LMNOs and the industry that they will support and from which they will profit. There is no way that with our little company we will be able to do it all on our own. But we are still working on our piece of the puzzle because the larger vision is what is important. When I see major companies also evolving their business models in the right direction, working on their piece of the puzzle, I get excited at the show of progress.
I Want To Create Value For Consumers. That Is All.
Pick up a copy of this month’s Fast Company. I am quoted in the article "Flipped to Last" which is basically about what I am discussing. Senior Editor David Lidsky was doing a retrospective on Jim Collins’ 2000 essay “Built to Flip” and wanted to get my perspective as an entrepreneur. David asked why entrepreneurs don’t aspire to “built to last” status attributed to the greatest entrepreneurs among us like Franklin, Edison, Ford and Jobs.
I explained that it isn’t that entrepreneurs do not want to build companies that have lasting value, and indeed many are doing so right now. It is more the case, I argued, that entrepreneurs simply want to create value, and it is perfectly reasonable for the market to decide where that value gets placed and for how long it will last.
If you can see the vision, that will get you half way there. If you can then execute on the vision, then you are adding value where it did not exist before. How much value you can add depends on how well you can execute on the totality of the vision. And that’s where the line blurs between “built to last” and “built to flip.” Sometimes in order to execute on a broad vision that is built to last, some pieces of the puzzle have to be built to flip – intentionally incubated and hatched in a conducive environment so that their value can be added at the right time to complete the picture. To see the vision realized you don’t necessarily have to own 100% of it. I really like Lidsky’s choice of title, Flipped to Last, because that is exactly what I was explaining. Let's say the vision is "personal computing." Think about how many entrepreneurs have sold their software companies to larger software companies to help deliver the vision of personal computing. Nothing wrong with that.
And that is all I meant in my last post – that the now forward-thinking News Corp. is apparently putting together some pieces of the puzzle in a way I would be doing if I had their resources and wanted to build an LMNO. If they are doing what I think they are doing, they will eventually have to add a mobility piece to complete the puzzle. It's a piece they will soon figure out they want and they are going to find it somewhere.
Posted by Shawn Conahan at 02:45 PM | Comments (0)
July 19, 2005
News Corp.: MNO
News Corp. is getting a bargain for MySpace
With the acquisition of MySpace, News Corp. will become a Media Networking Operator. (MNO) As I mentioned before, there are plenty of technology and media incumbents realizing that their futures rely on how well they execute their MNO strategies.
I previously made some predictions about what types of companies will be recognizing the value of Media Networking to their existing businesses, and frankly News Corp. never would have made that list because I thought they would have been too slow to recognize the opportunity. I instead focused more on technology-based companies since I think they have the most to gain from the Media Networking paradigm as they are in a better position to disrupt the incumbent media companies’ core offerings. (Incumbent media companies generally look slow and lumbering to me. Fox clearly isn't, and I am very pleased to see that I was wrong.)
It is when these companies add the “L” to their MNO when things get really interesting to me. If you believe the mobile connected device in your pocket is the only media device that you will need or have in the future, then you understand that the next stop for companies that turn themselves into MNOs is to become LMNOs. The L stands for “Location-awareness” which really means mobility, which to me means the Z-axis that adds dimension to media and makes it more personal. I mean the kind of personal that enables media to reach right into your pocket. My personal favorite pick for the first large-scale LMNO remains IAC. Here are my thoughts on that from a previous post.
What News Corp. Should Do With Their New Toy
It would be myopic of News Corp. to assume that MySpace gives them a new distribution channel for their existing library of Fox content. But if they use the Media Networking paradigm that MySpace gives them, they could lead the industry in creating an entirely new category of media almost overnight. The media titans of the future will redefine the business models around media from “something that is created once then mass produced then distributed” to “something that is found, borrowed, added to, redistributed and found again.” That’s a hard concept to implement when you have the kind of organizational inertia that big media companies have. Then again, I would have assumed that News Corp.’s inertia would have blinded them to the MNO opportunity in MySpace. I hope not. I would love to see them fully realize their value as an MNO. They got half way there by buying MySpace, but if they just treat it as a web site that represents inventory on which they can sell ads, they will have missed the real opportunity. If they actually integrate it into their media offering, they will become the current leading MNO and that’s why I say they will be getting a bargain for MySpace.
Did you see the In-Stat press release about low consumer interest in mobile video?
As it is currently being marketed, I am uninterested in mobile TV. If you have ever watched a sitcom on the internet, then you are a likely customer for TV on your mobile phone. I don’t know anyone who has ever watched a sitcom on the internet. I do not believe repackaging content from one medium for another is a smart idea unless you are changing the context of the media. (For instance, turning music into personalization in the mobile space created the ringtone market.)
I am positive that people will watch video on their phones - it just won't be network-scheduled or repackaged episodes of whatever Paris Hilton's TV show is called. It will be content created in the context of the mobile environment and it will be useful in the mobile environment. 99% of it will be crap to 99% of the people who have access to it. Such is the nature of distributed networks. But 1% of it will be gold to 99% of mobile users at some point in time. Such also is the nature of distributed networks.
I obviously have a bias toward the concept of the LMNO. I really think it is the future of media, and I am encouraged by the steps I am seeing companies take in that direction. We have never seen millions of people walking around with mobile connected camcorders. They are starting to create the haystack of content that is going to represent the new new media of our century. There is a new type of media that makes perfect sense in the mobile space, and if News Corp. added mobility to their offering they could really innovate.
First, they have to not make the mistake of trying to repurpose their existing content catalog on the net.
Then they have to understand how to introduce a completely new type of media that fits the environment.
Lastly, they have to bolt on a mobile extension that gives them the ability to extend the value of the mobile connected media production and consumption devices that millions of people have with them 24/7.
I think they’ll get there sooner or later. If it's not them, someone else will. It seems inevitable that a darkhorse media titan will emerge in this new area of paradigm-shifting media, and it is my ambition to help make it happen.
Posted by Shawn Conahan at 02:22 PM | Comments (0)
July 14, 2005
I Am A Citizen Journalist
A New York City building collapsed this morning, injuring several people
I am in New York this week for several meetings. This morning we were finishing breakfast at a restaurant on the upper west side when we heard sirens and saw fire engines rushing by. A few blocks away, a building had collapsed. Apparently it was being carefully demolished anyway but then lost structural integrity and came crashing down unexpectedly. I was there shortly after it happened and snapped the following pics with my camera phone and posted them to my channel on Rabble. (I also added my reporter-style commentary. If you have Rabble on your phone, just search for “building collapse” or browse the recent posts in the New York area.)
NYPD Canine Team on site to search for buried people
Hundreds of people looking at an empty spot where a building used to be
Police rope off the area around the collapsed building
Of the many opportunities that only LMNOs can capitalize on, my personal favorite is citizen journalism. We built our platform to be the hub powering a suite of applications all based on the same basic construct – that user-generated content and distribution via a series of overlapping personal networks is the future of media. There are literally hundreds of applications that fit this paradigm, but citizen journalism is one of the most important.
Turning Point: London
We will look back at the London Bombings as the turning point at which mainstream media realized the value of user-generated content. We all saw the video of the evacuation from the tube caught by an ordinary person with a camera phone. We also saw the story in the New York Times that featured an amateur photograph. The BBC in London was quick to respond to the story of the disaster and secured the rights to as much amateur coverage as they could. That picture in the New York Times came from the BBC, not Reuters or AP. But it could have, if Reuters or AP had a network of citizen journalists with camera phones. These are the companies that have to build the last mile of their networks into the pockets of ordinary people if they are to compete in a media future that distributes information through fewer links on the value chain with decreasing friction and time.
In the near term, the opportunity is for the incumbent news media companies to embrace citizen journalism by attaching themselves to the technology that is bridging the gap between what is essentially millions of mobile freelance stringers and their front door.
That having been said, this morning was a reminder to me that we are about to see a revolution across all media which gives ordinary people like you and me the greatest opportunity ever to affect significant change to the existing media infrastructure. In the past twenty years, technology has been pushing media production farther to the edge of the network. Desktop publishing, at the time, was a major step forward toward putting previously expensive production services into the hands of anyone with a computer and a laser printer. Then point-and-click website production tools fueled explosive growth of the web. Recently blogging has challenged many incumbent media industries like journalism and PR and has fundamentally altered the way businesses have to communicate with their customers and other interested stakeholders.
This change is good. More and more power is being shifted to the edge of the network where consumers have the tools to build an audience and exert influence like never before. Communication in general is being routed through fewer links on the value chain and as a result is becoming more raw, more pure and more personal. The farthest edge of the network in the media world is into the pocket of the mobile citizen who know has the equivalent of a broadcast network in their pocket. And that mobile citizen is connected to every other mobile citizen through the wireless networks and a series of overlapping personal networks based on friendship, affinity or even just a keyword.
Think about that – I was here in New York and captured a moment that may have been interesting to some other people in New York or around the world. The other people who saw it were able to connect to me directly. I got a few messages from other Rabblers asking me about various details, and I engaged in a short SMS dialog with them, creating an interactive story for all of us and a flash community around the concept of the building collapse. In this way, Rabble is the glue that connects these mobile citizens by giving us a marketplace to transact our content.
Now think about this: This morning a half dozen people and I totally bypassed the newsvan, the cameraman, the reporter, the satellite uplink, the broadcast studio personnel, the news anchor on the air, the cable infrastructure, the television, the set-top box and the TiVo. What we used instead were camera phones, MMS, SMS, wireless data and the infrastructure of the wireless network operators which we payed for by the minute for the privelege of using to transact our media with the community.
The opportunity in the longer term belongs to the network operator. By providing the handsets, applications and networks for this user-generated content to flow between their users, they become the new distribution giants for a new kind of media that will put the cable industry and media incumbents on the ropes.
Posted by Shawn Conahan at 11:12 AM | Comments (1)
July 04, 2005
A Dark Day in the History of Media, Part 2
Change Is In The Air
When I say “in the air” I mean literally atomized, and as difficult to see or contain as air. The most interesting fallout from the Grokster case is that it may have provided the blueprint for the development of a P2P community that cannot be killed. I understand why the incumbent media companies have to play whack-a-mole on the technologies that threaten their business models, but the danger of using the courts to do it is that every time a ruling is handed down it has to specify what is illegal. Creative technologists need only create a paradigm that doesn’t include any of the explicitly illegal items specified to force the media incumbents to continue spending their profits trying to lock down their distribution models.
A Blueprint in Four Sentences
Below are two excerpts from the Grokster ruling. To me, they explain the other 55 pages of the decision:
"We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."
"Despite offsetting considerations, the argument for imposing indirect liability here is powerful, given the number of infringing downloads that occur daily using respondents software [Grokster and Morpheus]. When a widely shared product is used to commit infringement, it may be impossible to enforce rights in the protected work effectively against all direct infringers, so that the only practical alternative is to go against the device's distributor for secondary liability on a theory of contributory or vicarious infringement. One infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise the right to stop or limit it."
So, build a P2P network and don’t promote copyright infringement, and don’t profit from it.
Richard Cotton, executive vice-president and general counsel at NBC Universal said in this article, "Many of the services that were the direct focus of legal proceedings will start to explore whether they can morph into legal operations."
I think he’s right about that. I think the services that were formed as for-profit services will try to pass muster because of their economic interests. But what about the services without any economic interests? What about the fully distributed, open-source developed P2P solutions that don’t promote copyright infringement and don’t ever intend to profit from it?
My concern for the incumbent media companies is that if they continue down the path of locking down their distribution channels, moving link by link on the value chain, (in exactly the same way you would if you were in their shoes) they could push their problem entirely out of their control: To the farthest edges of the network where there is literally nobody to sue. I hope they don’t think that it would be a big win to effectively discourage any enterprise from trying build a business model around P2P. I hope for their own sake that they don’t think that the Grokster ruling will help create “a constructive dialogue between content and technology companies” and that is where it ends.
Edgar is right that the Grokster ruling will bring some parties to the table looking to become legitimate “industry-sanctioned” file distribution services, but I’ll bet there are enough geeks in this world willing to build P2P software who don’t have any interest in engaging in constructive dialog. Then, like I said in my previous post, the incumbent media companies will have to go after other links on the value chain to protect their intellectual property. That won’t be fun for anyone.
The Upside Of Piracy
For a great many artists, P2P distribution networks represent an opportunity to present their content to an audience that would not otherwise be available to them. Digital distribution has made it possible for small music labels to flourish where the incumbent media companies cannot. Even independent artists with no representation are using P2P networks to distribute their content because it builds audience. Every band starts out wanting someone to listen to their music. Only later do they need for someone to pay for their music. The average independent band makes far more money from ticket sales at small venues and selling t-shirts than they do selling albums. Somewhat ironically, the technology of mass distribution may be empowering a resurgence of the independent artist and the value of the local market to music. P2P technology enables trends to be identified faster, and so it is no wonder that even the top music labels use P2P networks to research what’s hot and to push certain bands in their stable.
Not that there’s anything wrong with it. I am just saying that maybe a little piracy is a good thing if you are a major media company faced with spending a certain amount of money on market research and your two options are inaccurate focus groups or highly accurate hard numbers on how many people are downloading what kind of music. And maybe a little piracy is a great thing if you are an independent band trying to build audience and loyalty to your brand by involving your fans in your art.
The Grateful Dead encouraged fans to record their live shows. They built arguably the most rabid fan base of any band in history. I don’t think the Grateful Dead or their record label calculated the negative impact of amateur recordings of their concerts on album sales. I have a feeling that at the end of the day so much money was made in general that nobody really cared from a financial standpoint, and I don’t know a single record executive who wouldn’t love to have a marketing team built into the audience for one of their acts that could even come close to the legions of Deadheads who followed the band around and elevated their shows to near-religious status. If those Deadheads were sharing their tapes of various shows and that was building audience over time, then isn’t P2P software the evolved version of that?
Today’s independent band wouldn’t call their songs being traded on P2P networks “piracy” – they would call it “promotion.” In the music business, the dividing line between the two concepts is simple: If you have a record deal and someone else is trying to profit by selling your music on little shiny discs, then P2P is piracy. If you don’t have a record deal and you are trying to get people to come to your show at the 100-seat venue this weekend, then P2P is promotion. There is no distinction between “user-generated content” and “independent artist,” because by definition independent art is user-generated. So what if the incumbent media companies chase down the various involved perpetrators in the P2P piracy chain to the extent that you cannot get any major-label content on P2P networks? Could the strategy backfire and actually enable the creation of a more efficient way for music fans to discover new “user-generated” music from independent artists that cannot be found anywhere else?
The tipping point will be when the internet is no longer a secondary distribution channel for media. Today, it is more the case that you hear a song on the radio before you hear it anywhere else. You hear it over and over again and then develop an affinity for it, and then you want to own it so that you can weave it into your life. If you are like millions of consumers, you then go to the internet to steal it. But when the tables turn and fewer people are listening to radio compared to people surfing the internet for new music, or when people are receiving new music streamed right to their MP3 players, then the market for all user-generated content will truly blossom. When the internet is a primary distribution channel for new content, there will be no reason to ever sell a compact disc again. Rather, all of the value around the content will be the reason for artists to create, and today’s battle over distribution will seem unproductive. The smart media incumbents are already recognizing this and taking steps to embrace digital distribution. I know I have said it before, but I’ll say it again: The biggest threat to incumbent media companies today is not competition from other media companies, it is competition from their own customers. Media companies beware the 14-year-old girl with a mobile connected camcorder producing her own mobisode-based reality show.
If you are not on the enabling side of the coming wave of user-generated content, there is absolutely no hope of building the media incumbent of tomorrow – a media company focused on participative media, overlapping personal networks as distribution channels, media sharing as promotion and location-based media production and consumption tools that turn media into communication.
Posted by Shawn Conahan at 10:32 PM | Comments (1)