The Gus Log

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.

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.

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.

The disc is not dead - Do the math

In plot-twists wothy of a Shakespearean drama (or a bad soap) the latest 'format war' was pretty much settled over this weekend, prior to the Las Vegas CES. Warner and then Paramount's decision to dump HD DVD, and the anticipated desertion of more names from their consortium provided a coronation for Blu Ray. Thanks God - wasn't the writing on the wall 18 months ago with the PS3 spec announced?

What is really dumb is those commentaries saying it doesn't matter because 'down the wire' availability of network movies and television is going to render disc storage formats like Blu Ray obsolete.

A simple appreciation of the storage and network mathematics explodes this theory. Blu Ray discs store 25GB on a single layer, or 50GB double layer. Series boxsets ( a big seller) are already emerging with 5-discs included - or 125GB of high def picture data. The same format transfers data at around 34MB/s.

The capability for households to receive streaming standard resolution and High Resolution video on demand (in the UK) is tied into the fortunes of ADSL 2+. 75% of broadband connections in the UK are ADSL, not cable, and the capability to receive HD, or even DVD quality A/V is dependent on the ADSL connection to the susbscriber.

Only connections at the upper end of the ADSL2+ spec, of 24MB/s are capable of delivering content of quality that can compete with a HD disc. Most people do not - will not have these connections because they are content to sign up to discount, packaged ADSL deals of 4,8 and 16h MB/s. Also, ADSL has an inbuilt issue with degraged data transfer speed the further you live from the exchange.

The result is a fragmentation of the service quality that's going to be there for the lifespan of disc formats like Bluray (5-7 years tops). By the time innovation has led to a reliable HD-carrying connection to the majority of broadband homes, Blu Ray will be on its way out anyway.

The bigger issue is storage. If indeed users are picking titles from a network library, then the idea of having a shelf at home packed with discs may indeed seem archaic. But will they be happy with that, assuming they have the connectivity to get it immediately on demand? The problem with libraries is that they can only lend out what they have.

Intellectual property rights are going to make it difficulty for any library provider to achieve the critical mass. This is going to make the process convoluted for the consumer. Easier then to go out, pick up a disc and bung it in a machine.

Local storage is the third problem. That boxset I was talking about is 125GB. That would be half my current home PC drive - not backed up. Even the new larger home HDDs in media centres and PCs are going to support very small libraries. Whatever the ongoing cost reductions, optical read-write discs are always going to be cheaper than magnetic storage.

Therefore Blu Ray's penetration may be even greater as a DIY storage mechanism than as a retail container for pre-burned discs. Why DVD burning at home hasn't taken off is intriguing - obviously the issue of piracy looms large. manufacturers and service providers have colluded to make the transfer of files from HDDs like Sky Plus onto rewriteable DVDs more difficult than it needs to be.

Rewritable Blu Ray will allow users to store many hours of SD programming on a single disc - creating their own DIY series boxsets, or HD movies from HDDs, removing the local storage problem. Content channels like BT Vision and Sky won't rush to embrace this, but if the threat from online downloads of video does begin to materialise, they will become more amenable.

All in all, the threat to Blu Ray from 'down-the-wire' is mitigated by so many factors, it can be discounted.

Life - needs organiser

Get a Life!

Yahoo Life!: Yahoo's main attempt at CES 2008 to breathe new life into its brand was a demo of how it could organise yours. Yahoo Life! (exclamation mark) is a vision of convergence around personal data, communication and scheduling which reflects both the need to simplify and consolidate our digital footprint and reflects the emergence of 'life organisation' behaviour mainly through social networks.

To Yahoo this must be painful. Yahoo was organising the web's information before Google, and it was one of the first to offer copious tools for personal data storage and profile, communication through mail and messenger and social networking through groups.

So why didn't the plethora of services constitute the critical mass of becoming THE life organisation tool. Well, there is no single life organisation tool yet. Although many people use Facebook for organising their social contact and maybe even their diary, they will still use other services for mail, content feeds, instant messaging and other stuff.

I'd argue it wasn't life organisation that attracted users to Facebook anyway. It was peer pressure and curiosity for the bits and pieces which came with the open platform initiative.

However, once someone is established on Facebook and has tired of the games, polls and widgets it's the basic life organisation capability that provides the stickiness.

It must be said that Facebook still does not exhibit great usability in this respect. The mini-feed was perhaps the inspired presentation device of the last 12 months, but it can become irrelevant. Event planning is difficult, messaging is cumbersome, presence is not properly represented and a tie-in to location not apparent. However, the open application architecture means that the market will soon provide all of that.

The issue is that most people nowadays shop at the supermarket, not the market. They don't want 10 types of wall function - they want one.

But what constitutes 'Life organisation'? When we created our new generation of specialist platform sites, the 'community' aspect was a key consideration. Community functionality was well understood as being about communication, profiling, networking socially, sharing media.

I began to realise in a specialist context that there was a whole set of activity spawning from 'community' that was more accurately defined as 'Life organisation'. If your a fisherman, it means deciding where to fish, when to go, plan how to get there, invite your fisher mates, garner their replies, set yourself a reminder and add it to your calendar.

In any other specialist community its about helping you do what you want to do. No one service or application is doing this currently and people are converging them manually in order to achieve that result.

It remains to be seen whether there is desire for a converged life organisation tool, or if people are happy to work across several as currently, but there is a clear case that developing life organisation with specialist interest or content sites, either by building them bespoke, or integrating a service like Yahoo Life! will have takers.

Why fi?

Since being gifted an Ipod Touch  (thanks Mark!) in the last few weeks I have become acutely aware of the limitations of Wifi. I love my Touch, even more for tactile browsing than playing my sorry music collection, but it's highlighted how patchy and disconnected still the wifi world is, some five years on from its emergence.

Wifi was unquestionably the biggest improvement in home computing since the internet itself. Not only did it create the multiple device home in one fell swoop, it allowed connection between devices and mobility. Wifi is directly behind the massive growth in laptop sales, and the common adoption of the laptop, which was once a business device, into a consumer electronic device. And the cultural effects are only just playing through - once you take the laptop out of the office and into the kitchen and in front of the TV, connectedness, as a part of minute-by-minute living changes.

So in the home, so good. The operability and compatibility of wifi is pretty brilliant. You can change broadband providers and modems/hubs without any problems and just a password change. Connections are reliable and easily repaired.

Outside, its a different matter. The technology is the same, but its the business of wifi that is holding it back. whenever you try and log on you are passed through a convoluted and cripplingly expensive sign-up/payment process. Ok, there are some established networks, and many people get airtime minutes on wifi as part of a broadband or mobile package but few use them.

This stuff needs to be free for godssake! Providing a wifi hub and a broadband connection in a cafe is no big expense for the chain or proprietor. Trying to screw £5 or more an hour for access is pointless greed. I want to see everyone in Mcdonalds browsing on their Ipod Touch's instead of reading the nutritional info on the page liner.

The networks should be having ad-funded portal pages, not be erecting credit card barriers. So let's not hold back wifi any longer.

Top 10 Tech resolutions

I don't remember when I last thought up a new year resolution. I don't smoke (really) and I'm not a half-ton mum. I give to charity, have a hobby, so smug glows all round. However, I need an entrypoint for this blog, having deleted all its frivolities for its renaissance as my commentary on tech and digital. So 10 new year's tech resolutions:

1. Have my first web site (since 1997). I really should. I think Freewebs should do me nicely.
2. Transcode some of those 50 hours of mini DV onto Youtube.
3. Find a use for Twitter.
4. Stop ignoring people on Facebook/ Delete my Facebook acct.
5. Challenge anyone using nonsense words like 'orthogonal' in professional meetings
6. Make an enterprise decision around a widget provider.
7. Update the GPRS settings on my mobile - I've done without diahorre-mail for at least 3 months and I don't care!
8. Pay to download a movie from somewhere (for the hell of it).
9. Get some friends on the PlayStation Network.
10. Relaunch a website that is not subject to instantaneous vituperative attack from the loyal userbase.