The Gus Log

Iphone: Ipod + Facebook + Salesforce = world domination

I downloaded the much trailed (hyped?) new software update from Apple for my Ipod Touch this weekend, and had a booster jab for my begrudging admiration for Steve Jobs and co. It's a love/hate thing going on, because quite a bit of what Apple does; DRM, Quicktime over Flash etc. annoys me, but I just keep coming back for the experience.

Now, I don't have an Iphone - yet (boss?), but I have an Ipod touch and I can extrapolate the potential. The Iphone equals the Touch with ubiqutuous connectivity, voice, camera, and location awareness. Apple's big fanfare was to launch a faster (3G) version and drop the price.

This almost knocks the software update into the background, but that's much more important. In launching the Apps Store, neatly integrated into Itunes, Apple have taken the phone into a new epoch. That's a strong statement, so let me explain.

To me, there have only been two really remarkable web stories in the last couple of years. One is Salesforce, the other is Facebook. Salesforce are in the process from being a powerful niche SaaS vendor for CRM, to being a application marketplace that could potentially serve most if not all of the business systems need for S-M-L-XL-XXL companies. They've done this through Force.com and the apps marketplace that allows vendors and service providers to tout customisable business applications. A kind of SaaS Ebay.

Facebook needs no further introduction. What is has become is a communication experience where the job of the internal team is just to enable the community to develop out its functionality.

Both services adhere to a paradigm that I saw emerging years ago - that the network will always evolve faster than any particular node - however massive. That's why Microsoft continues to be left choking in the dust.

What Apple are doing with the new Apps Store and Iphone is opening up to the creativity of the network, and enabling the network to profit from it. Apple allows app providers to charge a wide variety of prices for apps (unlike music or video) and will let them keep 70%. Also, they allow paid apps to co-exist with paid ones.

Downloading, installing and using an app is an  effortless process that takes seconds - typically Apple. Within a few ours, I had transformed my Ipod, a music player with a couple of videos, into a mapping platform, an electronic book, a games machine, a multi-account mail reader, a document viewer, a blogging platform, and a mobile access point for my Facebook profile, including chatting to my online friends.

I had pretty much assembled all the functionality of what a top of the range SmartPhone would have offered a year or so ago, for the £6 software upgrade. But that's just day 1. There is going to be an explosion in capability - and because it's a marketplace choice. As an example, take lists. There were around 5 or 6 different version of list applications, with different features and offered at different prices. I could pick which one I liked the look of or was rated the best. There are already about six different versions of the Bible. I-quran, anyone?

It makes the traditional mobile phone offering of packaged apps and non-upgradeable firmware look positively Soviet. As of right now the Iphone is an amazing little pocket computer. Within the next couple of years I am convinced we will see existing Ipod users flock to it as an upgrade for their existing music player, and as a replacement to their phone. For anyone involved in web sites, content, application or social media, it's going to be a playground for commerce, marketing and branded promotion. The main challenge for Apple will be to keep a lid on the app spam. Already the App Store is filling up with dubious crap.

The world for mobile operators, phone manufacturers, app vendor, media companies and of course mobile consumers will not be the same.

BBC websites £36m over budget

I would personally love a budget of £36m for my web sites. To be able to overspend in a single year that sum is just beyond the comprehension of most people working on the internet, but this is what the BBC has done.

As I mentioned before, the irony was not lost on me when the BBC's Digital Director came to lecture an FT.COM conference audience on building a web business. The absence of the need to generate revenue left me wonder what Ashley Highfield's basis for authority was. But I assumed he would have the experience and responsibility for cost management and sticking to a budget.

Apparently not. The 'fluid nature' of the internet is being blamed, but in the real world the costs are coming down due to open source alternatives, cheaper hardware and bandwidth and stiffer competiton. The BBC seems to be detached from market realities and even market trends.

Rather than lecture us whilst sitting in the jacuzzi of cash, maybe they might spend a week or a month at a company that has to balance its technology costs with its business revenues and learn a few lessons?

Why I'm Backing Boris...and why I am telling people about it

Ken Livingstone was on Old Compton Street the other night. Things are obviously getting desperate. Although, I remember seeing Ken floating around Soho once before, sipping cocktails with drag queens, and that was the last mayoral election. But where he was cruising (literally) back then, he's fighting for his political length this time.

And not before time. Ken's presumption - that he can make Holocaust jibes at Jewish journalists, hire his cronies, bring in offensive religious radicals and treat the London Assembly with withering content - has evaporated as he realises people are tired of him and unimpressed with his record.

I hope London's gay and lesbian population will not be flattered or deceived by his sudden attentions. However he claims to have provided for their specific interests, they still drive cars, walk the streets at night, pay their tax which includes a rapidly inflating Mayoralty charge and

I play, you pay...

I wrote an article about the bandwidth effect of BBC Iplayer back in early March. My observations were correct, but my conclusions were wrong. By that I mean my basic observation was that despite being hailed a big success, the iplayer does not represent technological or economic sense - creating a huge hub-and-spoke infrastructure for the delivery of program data that would cost a fraction of the cost to deliver via broadcast means. It represents one huge, taxpayer funded, experimental conceit.

Except my conclusion was that the burden was falling on the license payer, where in fact it is falling on the ISPs who have a peering type arrangement with the BBC and are bearing the burden of Iplayer traffic on their lines leased from BT and paid for on a per GB basis. http://community.plus.net/blog/2008/02/22/will-bbc-iplayer-usage-break-the-internet-the-bandwidth-timebomb/

The arrogance of the BBC, piggybacking this entire arrangement is quite staggering. Their view is that ISPs are misrepresenting their products, which are based and costed on the basis of a certain amount of capacity usage per user which Iplayer busts to bits. Every utility we have in this country - electricity, water, roads are based on such a model. If everyone turned on the toaster, or got in their car at the same time, the actuarial balance on which services are provided and charged would be destabilised.

To me the answer is simple. The ISPs should introduce a charging gate by which the BBC pays for the bandwidth consumed by users utilising connections for Iplayer. They get a free ride in every other area of media activity, it's time to teach them the fundamental laws of the market.

What it also should mean is that businesses seeking to build business models in the fantasyland of ad-funded video distribution over the internet should take an immediate reality check.

Martini media - stirred and slightly shaken

I've been trying to mix myself some martini media over the weekend, and while I experienced some success, it confirms that only the semi-technical adventurers will be able to make the concept of 'anytime, anyplace, anywhere' for their favourite media a reality some time soon.

Here were my ingredients for the martini; my home PC, my DVD collection, my PlayStation 3 and my PlayStation Portable (PSP).

The PSP is the anytime,anywere bit. It has built-in wi-fi, so as long as you have a good signal at an access point, you're onine. One of the features of the PS3 is 'remote play' a function that allows a PSP to control the PS3 remotely over the internet. This means that music, videos and some games stored on a PS3 can be played over the internet from far, far away.

However, the last thing you want to do is to have to duplicate your music and video collection of your PC and store on your PS3 hard disk. This is where the PS3's media server network capability comes in.

The PS3 can search for any DLNA compliant media servers that are within range of the wireless network it is on. In practice, this means a media server on your PC. Now, Windows Media Player comes with a built-in DLNA server which is easy to turn on just by selecting the Media Sharing option on the library.

In practice it's a bit shit. So using online advice I downloaded a free DLNA server called 'TV Versity'. This can easily generate it's library of audio/visual files from your PC just by pointing it at the folders. Within a minute or so, it had indexed my entire Itunes library. Itunes (surprise, surprise) is not a compatible media server, though you can use it to network between different Itunes clients.

I had already backed up several of my favourite DVDs, e.g. boxset of 'Six Feet Under' onto my PC. This is a torturous process using a combination of tools to rip the DVD and then transcode it. If the media industry finally accepted people want to back up video like they do their music, this could be much simpler.

The end result - I can access my entire home itunes library, anywhere in the world near an access point via my PSP and watch my digitised video stored on my PC on demand. Maybe not quite anywhere, and not reliably anytime, but getting there.

Phorm-idable

I was invited to a meeting a few months ago which included reps from Phorm, the behavioral targeting ad network who are currently attracting a lot of controversy from internet rights groups. The bad press is down to the novel - and slightly unsettling way - Phorm dips into your browsing history in order to be able to target ads at you on sites which are part of its affiliate network.

It does this not by looking at your browser history, but at the records kept at your ISP, which it then turns into a cookie in your browser.

Most people I know would be alarmed at this basic form of snooping, however benign the intention. There are questions to be asked of ISPs too, who have quietly consented to this invasion of privacy, simply for a cut of the ad dollars.

Not quite so voluble, but no less concerned, are the publishers. Phorm's system takes away an aspect of the premium attached to the site/brand sell for advertising. Phorm's ad network can track users of target sites and deliver ads to them specifically from anywhere else. You want visitors to FT.COM who have also visited moneysupermarket, comparethemarket and Autotrader in the last 30 days (we can safely say they're looking for insurance for a new high end car)- Phorm can do it.

The last kick in the groin is that Phorm's marketplace is a dutch auction, so publisher's are encouraged to drop the price they are willing to accept in order to get the business from advertisers, who put a maximum delivery price on their campaigns. There is only one way this model will play out - 'beggar my neighbour' between publisher scrabbling for ad revenue to fill their excess inventory.

Phorm of course realise they need affiliates to actually serve the ads, so they soft-peddle the harsh reality of this kind of market, and they also know that smaller players without an ad salesforce will see revenue they otherwise could not get. Large publishers will effectively subsidise them by providing the demographic of the 'premium' audience who go to them en masse, and are then targeted somewhere in the realms of the blogosphere or on some minor site.

Will Phorm's product take off? Does it matter if large publishers stay out - assuming they choose to do so? Has the time of the ad auction arrived? Will negative publicity cause the ISPs to chicken out? Could the Data Protection Act play a role?

All these questions and more will be answered in the developing episodes of the soap opera.

All we hear is radio gaga

There's nothing I like better than a good argument in the office. A good argument anywhere, basically, but in the office it saves having to do work. I had a good one this week with a colleague on the nature of 'brands'. Now, I am one of those who distrust the 'black arts' of the marketing industry, its funny jargon and its premise of making people want something they don't really need. I know that's a rather biased and one-dimensional view, and I attended a strategic marketing course which was out to persuade me it was all about understanding the customer and developing the product around their needs. Which I wholeheartedly support.

But branding, and brand association is something I regard as altogether more ephemeral, and in many ways outdated. I subscribe to the view that a brand is, in all cases reductive to a promise of some kind. The promise that every can of coke will taste like a can of coke. That every issue of Heat will give you all the most relevant gossip of the week. To me the rise, continued success, and eventual failure of brands is nothing more or less than the product or service's capability to repeatedly deliver that promise.

Everytime we have a flat can of coke, every time we wait in a long queue of McDonalds, the promise is not delivered and a little part of the brand dies. When it happens systemically, the brand withers. My colleague begged to differ. Brand association, she said, was more complex than a simple promise. There was moonlight, magic, mystery and probably a large advertising budget.

'Take BMW', she said. That's not just a promise about function. That's about the brand itself creating the association with Status, and about the customer (and more importantly the non-customer) buying into that concept of Status.

'Aha', I said. It's about the promise of Status. If I was to buy a BMW, and it didn't confer me the Status, would I be fully satisfied? I think not. I was promised the Status and if failed to deliver. Brand damaged.

But that counter-argument made me think of something else. If the brand promise/association is about Status, where does it exist? Reliability may be said to be abstract, but quantifiable – it can be determined metrically. Status is abstract but unquantifiable and, most importantly, exists in the heads of other people. Status is what THEY think of YOU when you own a BMW. In that sense, a brand association like Status is not coupled to the object, but coupled to anyone who comes into contact with the audience.

Nevertheless, the idea that a BMW is a Status symbol is a complex one built up and distributed by a variety of clever means. But it doesn't primarily emanate from the object itself, but from the general population.

This is getting a bit metaphysical right?

Okay let's think of it another way, and explain the basis of the title for this entry. Imagine that the distribution of brand associations is like broadcast media, radio for example. Imagine BMW has one of those big BBC transmitters and it's broadcasting all those feelings you should attach to its shiny cars…success…reliability…taste…money.

People pick up those signals, absorb them and they tend to reflect off them. EVERYONE KNOWS a BMW means success, money etc. Or maybe not. There's always an awkward squad. They think BMWs are for derivative unimaginative wankers, with an inferiority complex to offset.

But historically, those views, and other dissenting brand views, have been drowned out by the sheer power of the signal and the lack of a competing broadcast platform.

Enter the internet.

Once dismissed as 'CB for the Nineties', maybe that's not such a bad parallel. Blogs like this are a bit like CB. Rather desperate and unheard attempts to communicate, with a minimal audience and negligible impact. But some become like pirate radio. They're cool, they have an audience, they develop a tone, they have the means to keep broadcasting. They begin to drown out the big transmitting marketing for a significant number of consumers.

Munich, we have a problem. Those brand associations are being challenged. Okay, they don't have the transmitting power of the programming budget, but the message is closer to home, more authentic. The brand is being challenged.

So, consumers are empowered, right? They are getting the real truth, not just the ad-man's version. Or are they getting anything, except noise?

When you layer too many signals on top of each other, you get noise. Radio Gaga, Radio GooGoo. Consumers are ready to hear a plurality of opinion across the internet, but it doesn't always translate into an opinion of their own. My view is that people generally wish to synthesize an opinion on any subject from the source material.

So where does that leave a media company. We are the media – the bit in-between. Our mission in this scenario is simple – reduce the noise. That doesn't mean reduce the signal back to one. It means offering the consumer access to the dial. Allow them to sample and select across the range of opinions – personal ones, group ones, corporate ones, expert ones, crazy ones, angry ones, fanboys and girls, news sources, consultants, creators, consumers. It may also mean offering the diffident ones a simple platform of their own – their first CB transmitter, to start broadcasting.

So how do they support the plurality, without the noise? Through tools. Through filters – automated and human. Through empowering the community to sort out its own noise. By simplifying the landscape by focusing on a niche area of branding and activity.

Media companies have become aware that the simple concept of 'broadcast' is now an outmoded one. But I think they believed in most cases the evolution was broadcast with a return channel. It's not – broadcast is alive and kicking. It's just open to everyone.

 

Crash 2.0

Working on the internet is so much fun that thinking about money, wages, profit, return on investment just kills the party and should be avoided at all cost. If you really do have to handle that question, maybe if you are on stage at a conference talking about your new video-feed-comparator-social-widget whatever, just say 'we have an ad-funded revenue model'.

If you in a conference audience, and you see some 25 year old CEO/CTO talk about their groundbreaking social-widget-streaming-aggregator-feed thing and they say they have an 'ad-funded revenue model' then note their name and the funky name of their company as they might be available for work in about 18 months time.

Chances are though, you are working for a funky-named company venture capital funded, or a subsidiary part of a larger company. Are you going to be hit by 'Crash 2.0'? Take the pop quiz -

Who is paying my wages?

1. 1. A consumer
2. 2. An advertiser (really)
3. 3. An investor
4. 4. Someone slogging their guts out in another part of my company.

In many cases the answer is c - for the bulk of your wage packet. Many companies are operating and developing on the never-never, a pile of cash provided to them in the expectation their cool idea starts to make money. In reality the payback time is never, because however cool the idea is -

1. Someone else can/is doing it better
2. People are happy to use, but will never pay
3. There is not enough ad dollars to go round

Repeat the last one. Make it your facebook status. Because, while advertising spend on the internet will grow, certainly not enough to keep pace with either the number of businesses clamouring for it or the amount of inventory they are generating. The result will have to be crash 2.0, with the inevitability of gravity acting on an egg dropped from a high rise.

It's that little matter called solvency, which cares nothing for the new media paradigm, the wisdom of crowds, free content and flattened earths.

Crash 1.0 was spectacular - it was all about a speculative rush fuelled by private investors and funds looking to make huge gains and quick bucks. The current wave of investment in 2.0 has been more low-key, fewer expectations, smaller sums, and executed more by well-heeled funds and angels than the guy in the street. Even by some of those who did well out of web 1.0.

Nevertheless, scale does not alter the fundamentals. A boulder falls from the empire state at the same rate as a tennis ball. The process will be less shocking this time, there are fewer illusions. It's like sitting through a horror movie which you've seen before - the ending is predictable. It will also be massively productive.

There is currently so much duplication and so many curiosities which people would be best not spending any more of their short mortal existences on. There will be some survivors, many failures and a lot of people out of work. The reason is will not just be like the normal ebb and flow of business is because there was a definite pick up in activity, funding, inflated M&A, labour tightening/wage inflation around 2004-2005. Those investments are now working to their conclusions.

I pay, you Play...

So I endured an hour of Ashley Highfield lecturing me on 'new business models' for the internet early this week. I'm taking his advice and planning to introduce my own flat rate tax on households viewing this blog, plus a small army of enforcers to go around and peer in people's windows to check if they're looking at it. The BBC knows how to spend money, not make it, and please don't make me laughby referring to BBC Worldwide, its commercial arm. If it actually had to bid on the open market for access to programme rights, rather than get the on a plate, would it be half as successful?

Anyway, I wanted to check our the Iplayer they are keen to trumpet as a massive success, 2 months from catching up user preference and introducing Flash Video support. As you might guess from Flash very easy to start up a show, nice quality full screen. However, the programme discovery interface officially sucks. After six months of development. It's not rocket science to allow your users to search across more than one parameter. Okay, so I can list last night's shows, but not by channel too? I can only view one alphabetical letter at a time? If there are two episodes of the same show, they turn up randomly on the same browse page and I need to rollover to see which is which. The entire interface and UX seems an afterthought.

The other thing that nags me about this whole Iplayer thing is the economics. So the Beeb has responded to poor demand for the Peer-2-Peer powered download client. So that means it's hub and spoke delivery of Flash video content. Even a discount rates, just how much is it costing them per user per show? A 60 minute programme at 500Kb/s is 1.8GB at my reckoning. Even if this costs as little as 2-3, it shows the medium is not economic for large scale audience distribution of mainstream programming, from an ad-funded perspective. Niche markets with targeted audiences and high yield advertisers/sponsors yes, but Eastenders.

The BBC can go down this route because it sets its own agenda which, according to Highfield, is to encourage people to buy devices. Very odd, and not anything I recall from the BBC's charter. It's another boost to Flash video as the user's choice viewing method, but I don't think it offers any commercial lessons about internet television broadcasting.

Death of a salesman

So this week I did two full days at the Financial Times Digital Media and Broadcasting conference. I spent the first half day just reading the title. The coffee was excellent, but deceptively strong so be lunchtime on both days I was riding a caffeine wave and pestering and pontificating out in the lobby.

Most of the audience could have done with a double espresso. There were very few people under 30, if any, and there was almost a palpable sense of "inverted commas" when talking about concepts like the "semantic web" (there, I am doing it myself). I.e. nobody really knew what they were talking about.

The penultimate session on advertising was interesting/amusing. Sour grapes all round it seemed. The panel included the IPA - The institute for practitioners in advertising, someone from Saatchi, a couple of commentators in the space.

The IPA guy, and the M&C Saatchi guy both agreed there was too much emphasis on search advertising. Clearly the money flowing into Google's coffers for adsense and not into their creative extravanganzas is clearly a sore point. Moray Maclennan, of M&C Saatchi, claimed marketing depts. spending 50% of their money on paid search/contextual advertising are no actually advertising - just depleting their budgets. Hamish Pringle, of the IPA declared that search advertising worked well for the classified space, but could never create the great brand desire that classical advertising, bought of course through an agency, can.

Bollocks to both of them I say. The first sign of a failing business is to blame the customer for being too stupid to buy your product. Mr Maclennan says search advertising is all fine and good for ads which sell people to products, not for ads that sell products to people. This is all about the mystique the creative ad world loves to cling on to. The magic that markups a $5 bottle of industrially-produced scented alcohol for $50. Mr Pringle described it another way. Advertising for BMW, he says, is not just about communicating the joys of a BMW to its target audience in order to make sales. It's about communicating it to everyone, so the BMW owner knows that everyone else knows that a BMW is so great - that's why he has a BMW.

Maybe so. But I don't think that means anything more is that advertising of this type is becoming a luxury product suitable for a niche of brands. It's a classic internet pattern of POLARISATION. Things separate to high end and low end, the middle space is obliterated. low end here is search advertising - bread and butter. Google has democratised this fundamentally, and to fail to see this is to fail to understand the paradigm shift.

Consider how Google has allowed ANYONE to reach just about anyone/anywhere but in a wholly targeted fashion, who is in active seeking mode, provided measurability and charge on a targeted basis. What it means is that SMEs have power the traditional advertising industry was never able to give them, and at a fraction of the cost.

At the same time, the ubiquity of media, and a general post-modern cynicism with the media amongst a savvy population makes the traditional methods of the advertisers look increasingly hackneyed. The result is diminishing returns in the prospect of persuading us that mid-market brands are luxury brands, and the increasing commoditisation of services. Take air travel: differentiation of brand based on soft attributes is much diminished, whereas price, flexibility, availability and access to that information in context is massively more important. Where soft attributes are still important - like the customer service of an insurance deal - the community is providing a more authentic assessment of that than the advertiser's agent.

Advertising, like publishing and television is another industry where its exponents are facing a difficult truth, smacked on it by the internet. Someone younger, cheaper, less experienced and less proficient can achieve the same commercial effect. The answer to that is respond to the new need, not try and justify the old one. That their love of what they do is not paramount, it's the benefit of the customer. It's the advertising industry's choice to decide whether it wants to shrink into its new luxury niche - big budgets, big concepts, intricate bespoke campaigns - but fewer of them - or combine their creativity with more technological solutions.

Those technological solutions are behaviorally targeted creative advertising, contextual video, interactive creative, and working with services like search and social networks to weave their clients' messages into these experiences. Also, lower prices, faster turnaround.