Don Dodge on The Next Big Thing

Why Google is bidding in the 700MHz wireless spectrum auction

Google is bidding to ensure that the 700MHz wireless spectrum will be open to any application or hardware from any company. The Wall Street Journal confirmed today that Google will indeed bid. Om Malik asks "Will Google Play To Win?"  My guess is no...they will bid $4.6 Billion.

Why $4.6 Billion? The rules of the spectrum auction require the winning bidder to allow any device or application to access the network at "wholesale" rates, provided the winning bid meets the reserve price of $4.6 Billion. Google has already committed to bidding at least $4.6B, so that means the reserve will be met and the open rules will prevail.

Last week I wrote a story explaining what 700MHz spectrum is, and why it is so important to have it open to any company who wants to innovate. As it stands today the major carriers (Verizon, Sprint, T-Mobile) own the spectrum, make the rules, and set the prices. There has been very little innovation in wireless applications because the carriers control the economics.

Wall Street financial analysts were going crazy over the news that Google will bid. They believe Google knows nothing about the business and it will be a huge distraction. The stock (GOOG) dropped sharply by $29.00 from the opening price,  but ended the day down $4.00 at $693.00.

Typical Wall Street. They missed the point entirely. Google isn't in this to win. If they do happen to win, they will probably bring in a Telecom partner to build out the network.

Hats off to Google. The real winners in all of this are consumers who will enjoy more choice and innovation.

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Who owns your data on Google, Facebook, Netflix?

The blogosphere is raging about Facebook's use of "my data". Doc Searls is promoting the idea of VRM (Vendor Relationship Mgmt) and says "Time to write our own rules".

The bargain you made in exchange for free services. Consumers sometimes forget the bargain they made in exchange for the free services. Sometimes it means your personal information can be sold or marketed. Other times it means your content is not really yours anymore. Sometimes it means you get to pay for additional services once you are hooked. Or maybe that the rules change over time and the service is unreliable. Most times things work out OK and consumers don’t complain too much.

Free services always come with strings attached, limitations, service outages, advertising, etc. Facebook seems to be attracting all the attention now, but do people realize what Google is doing with “your data”? Your search history…your click stream data…the sites you have visited? Do they understand what information DoubleClick has collected on “your data”?

Dave Winer says "I want control of my data" and states in part;

I want Netflix and Yahoo to give me an XML version of my movie ratings, for me to decide what to do with. I've been asking for this for a couple of years, I still don't have it. This is information I created. I want to keep a copy. I want to make sure that Netflix knows about all my Yahoo ratings and vice versa. I'd like to give a copy to Facebook (assuming they agree to not disclose it) and maybe to Amazon, so they can recommend products I might want to purchase (again keeping it to themselves). I want to begin a negotiation with various vendors, where I give them something of value, and they give me back something of value.

Being able to export your Netflix ratings or Facebook friends list is mildly interesting, but inconsequential when compared to what is happening with your real important data. Maybe Doc Searls, Dave Winer, and the rest of the blog cognoscenti should focus their cannons in a different direction?

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Open vs Closed Networks, the future of 700 MHz wireless spectrum

There is a big battle brewing over control of the 700 MHz wireless spectrum that the US government will auction off in January. The winner of the battle will determine if cell phone wireless networks remain closed, or will be opened up to anyone like the Internet. This is a high stakes game, probably costing $7 to 10 Billion. However, US wireless carriers collected $95 Billion in revenues.

The Wall Street Journal reports that Google is seriously considering making a bid and building out a wireless network. Microsoft has declined to bid, and instead will work with carriers and manufacturers by providing Windows Mobile operating system.

What is special about this spectrum? The 700 Mhz wireless spectrum was formerly used by UHF TV stations, so it is very powerful and capable of transmitting long distances, even through walls and barriers. Most of us grew up in the cable TV generation so you may not remember when TV was broadcast over the air and picked up by an antenna at your house. Back then the  VHF channels (1-13) were used by the major networks and affiliates, and UHF channels (14-69) were used by public TV and smaller private stations. With the advent of cable TV, and now full digital TV in 2009, the 700 Mhz UHF spectrum is no longer used. The auction will be for the spectrum used by channels 52 through 69.

More powerful and cheaper to deploy - The 700MHz spectrum is more powerful than the current cell phone spectrum and can go through walls much easier. It is cheaper to deploy because the spectrum is more powerful so it requires fewer transmitters and towers, making it 50% to 70% less expensive to build out a nationwide network.

Open versus Closed? Everyone has a different definition of open, but what it boils down to here is the difference between the Internet (open) and the cell phone network (closed). 

Cell phone networks are closed. Verizon, Sprint, or AT&T control the networks. They decide which hardware manufacturers (Motorola, Nokia, Samsung, etc) can work on their network, and which applications (maps, games, music, etc) can be used on their network. The wireless carriers control their "walled garden", make all the rules, and collect most of the money.

The Internet is open to anyone who wants to launch a business and will carry any content; web pages, video, music, etc.

It is pretty obvious why there are millions of businesses and applications on the Internet and very few on cell phone networks.

Open doesn't mean free - The Internet backbone is owned by the major land line telecommunications companies. They own the fiber optic lines and networks, and some of the Network Access Points (NAP's). They sell usage of their bandwidth to Internet Service Providers (ISP's) like AOL, NetZero, and others. The ISPs in turn charge you each month for Internet access.

Who pays for the Internet? Both consumers and businesses pay in both directions, downloading and uploading. Most consumers pay a flat rate per month, around $50, for unlimited use, mostly downloading. Businesses pay more based on bandwidth usage, both uploading and downloading. Web based businesses pay a LOT more based on their bandwidth usage. You can imagine a business like YouTube serving millions of video streams pays a lot for the bandwidth they use. So consumers are paying a flat rate for what they download and businesses are paying for bandwidth in both directions.

Why aren't cell phone networks open like the Internet? In some European and Asian countries the cell networks are open. In those cases the governments made the spectrum available for free or at very reduced rates, and mandated that the networks be open to any business.

What is the FCC doing? The US government (FCC) is trying to have it both ways. They want to collect billions of dollars by auctioning off the spectrum, but they also want some of it to remain "open". The rules of the spectrum auction require the winning bidder to allow any device or application to access the network at "wholesale" rates, provided the winning bid meets the reserve price of $4.6 Billion. Google has already committed to bidding at least $4.6B, so that means the reserve will be met and the open rules will prevail.

Who will win? Everyone. Consumers win because they will have lots of choices. Entrepreneurs in hardware, software, and e-commerce win because they will be able to launch all kinds of new products and services. The winning bidder will win because they will own the future of the wireless business. That winning bidder could even be one of the "closed" network owners. Think about how they will juggle two very different business models; walled garden versus open networks. It will be interesting to see how the losing bidders respond to the open alternative. Competition always brings out the best.

The auction will be held on January 28, 2008. It could be a historic date for the wireless communications industry.

TechCrunch Boston

Mike Arrington organized TechCrunch Boston on Friday night, attended by 800 tech people, and sponsored by IDG Ventures. It was the best tech party of the year in Boston.

The IDG Ventures Boston team was out in force.  I talked with Michael Greeley, Chip Hazard, Jeff Bussgang, David Aronoff, and Kate Castle. Pictured here is Mike Ford (TownConnect), Mike Arrington, and Michael Greeley (IDG Ventures).

This was definitely an event for startups and entrepreneurs but I did talk to some other VC's including; Michael Skok (North Bridge), Lucy McQuilken (Intel Capital), Steve Schlafman (The Kraft Group), and Charley Lax (Grandbanks Capital).

Punchbowl Software was one of the startups doing demos at TechCrunch Boston. Here is David Aronoff (IDG) and Matt Douglas, CEO of Punchbowl (center) hamming it up with Mike Arrington of TechCrunch.

Mike was like a Rock Star. There were entrepreneurs and pretty women crawling all over him. Towards the end of the night Mike made me his manager/agent in charge of all photos and  meet/greets. I was sitting at Mike's table at the after party eating a late night dinner and Mike could barely get two bites before someone else approached. Mike was actually loving it. He is a great guy and will talk to anyone anytime. I went to the bar to order tequila shots for the table...Mike insisted on Patron. Only the best. Mike shouted to  Heather Harde, the brainy beautiful CEO of TechCrunch, that he had managed to spend $1,000 in the first 45 minutes of the after party. He was loving it!

On the way back to the table I bumped into Steve Schlafman (Kraft Group), Eunice Chou (Massive), and Danny Moon (UpNext). By the time I finally got back to the table they were on the next rounds of tequila.

There were some press people and lots of bloggers at the event. Scott Kirsner (Boston Globe) was interviewing and doing video. I also talked to Nick Carr, Francois Gossieaux, Halley Suitt, Doc Searls, and Wade Roush.

I talked to over 200 people at the event and saw another hundred or so with a quick wink or nod. It was a wild night. Startup entrepreneurs were everywhere. Off the top of my head I remember talking to; Ben Saren (CitySquares), Reed Sturtevant (Microsoft Labs), Doug Levin (Blackduck Software), Shawn Broderick (TrustPlus), Jeremey Allaire (Brightcove), Matt Douglas (Punchbowl), Mike Ford (TownConnect), Pito Salas (BlogBridge), Chris Herot (Zingdom), Danny Moon (UpNext), Eduardo Saverin (Firefly Health), Michael Kokernak (BackChannel Media), Mark Pascarella (Gotuit), John Zib (GetMemo), Scott Durgin (OffshoreTP), Nikhil Roy (Spendview), Sarah Meyers (PopSnap), Sean Ammirati (FeedHub), Dave Evans (TheProgressBar), and Ted Morgan (Skyhook Wireless).

I know I talked to more people but after 5 or 6 Martinis my memory was a little foggy. Here is Jeff Bussgang (IDG Ventures) and me towards the end of the night.

Next stop for the TechCrunch Party tour is Los Angeles in December. See you there!

More blog coverage of the event at Chris Herot's blog, and Doug Levin. 

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MacroMyopia overestimating the short term and underestimating the long term

There is a severe case of MacroMyopia spreading across the blogosphere. Today it is The Death of Email. Yesterday it was Inbox 2.0 - Email meets Social Networks. Macro-Myopia is the tendency to overestimate the short term impact of a new product or technology, and underestimate its long term implications on the marketplace, and how competitors will react.

Straight up and to the right - It is human nature to extrapolate the early success of a "new thing" to world domination, and to the death of the "old thing". Insert any variable for "new thing" like; Facebook, Twitter, Text Messaging, Open Source, Linux, YouTube...and you can finish the sentence with the death of the "old thing".

The best of both worlds - In most cases the early innovator of a product or technology wins some early success in a narrow market segment. The big winners come in later by incorporating the new technology into an existing product or service and creating a best of both worlds solution that appeals to a much broader market. I call this the "Innovate or Imitate - Fame or Fortune" scenario.

Will Social Networks, Twitter, and SMS rule the world? No, I don't think so. But, elements of each of them will be blended into existing business applications like Email, CRM, Knowledge Management, recruiting, and other enterprise services.

Email is ripe for innovation. As I wrote yesterday, Email is your natural social network, and there are big opportunities at the intersection points of social networks and business applications.  Brad Feld, Fred Wilson, Tom Evslin, and a bunch of smart people are getting together in NYC to think about ideas and investment opportunities at those intersection points.

But kids don't use Email...so Email is dead, right? Yes, it is true that the younger generation does text messaging and IM, not email. It is also true that they use MySpace and Facebook, not discussion boards and workspaces. So, Facebook, Twitter, and SMS will rule the world, right?

In a word, No. Those communication modes work great for kids, but kids grow up and get jobs. Work requires a different form of communication and collaboration. Social Networks are fun, but business networks get things done, and ultimately make money. Lots of money. Email might be one of those forgotten markets that could be a huge opportunity in the future.

Zoli Erdos agrees and has some neat graphs to tell the story. Mathew Ingram, a professional newspaper writer, has an interesting perspective too.

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Email contacts - the natural social network

Email is our natural social network. Our email contacts are already organized by work, professional, and personal friends. Email could easily adopt some of the useful social networking features to become a more powerful business network and collaboration environment.

The New York Times says "Inbox 2.0 Yahoo and Google to Turn Email into a Social Network"

Ignore Orkut, OpenSocial, Yahoo Mash and Yahoo 360. Google and Yahoo have come up with new and very similar plans to respond to the challenge from MySpace and Facebook: They hope to turn their e-mail systems and personalized home page services (iGoogle and MyYahoo) into social networks.

Web-based e-mail systems already contain much of what Facebook calls the social graph — the connections between people. That’s why the social networks offer to import the e-mail address books of new users to jump-start their list of friends. Yahoo and Google realize that they have this information and can use it to build their own services that connect people to their contacts.

Om Malik was an early and vocal proponent of making email the basis of your social network. His story "Google and Yahoo Finally Get The Memo: Email Is The Social Environment"

I had talked about this very same concept back in September: Is Email The Ultimate Social Environment? While Yahoo and Google are still talking about it, one start-up, Xoopit has already done it, and another one, Xobni, is well on its way to making that a reality.

Larry Dignan at ZDnet has it right in my opinion. "Social Networking: Quietly being subsumed by your everyday apps"

Social networking features will be dropped into corporate applications to the point where they become commonplace. A company like Trampoline Systems is an early social networking mover in the enterprise, but it’s not a reach to figure the startup will be acquired by a larger player someday. Social networking won’t be a hot topic as much as its just something you do. Don’t be surprised if social networking is built into Microsoft Outlook at some point in the future.

Email is where we work, communicate, organize, establish relationships, seek new business, approve things, and ask questions. It is the natural place to leverage our social network and collaborate to get things done.

LinkedIn is great as a business network. Why aren't those features built into our Email Contacts? Wouldn't it be great to be able to find anyone and connect with them through our existing network of contacts? Why not have pictures attached to each email contact?

Collaboration and Social Networking should be in Email - Prior to joining Microsoft I worked with Ray Ozzie at Groove Networks. Groove is a cool P2P collaboration environment where you can set up secure workspaces focused on a specific topic or project. Participants can be invited into the workspace where all the information about a project is stored and kept up to date. Groove is a great tool for managing projects.

The problem is that people LOVE email and spend most of their working time there. Most people don't want to leave email and jump into a separate application to collaborate on projects. Email is where they naturally communicate and collaborate.

Social networks are another isolated island of information. I use Facebook, MySpace, LinkedIn, Plaxo, and Flickr. They are fun, but not very productive. Why not combine the best of all of them in one place where I naturally work...in email?

Social Networks are fun, but I want a Business Network. Isn't that what Inbox 2.0 should be about? What do you think?

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Newspapers make deals with Zillow and HotJobs

Zillow, the online real estate valuation site, has announced a deal with 282 newspapers to display their ads on Zillow's site. In return, the newspapers can also use the Zillow valuation platform on their web sites.

According to a story by Reuters published on Cnet, (which is, in and of itself, a great example of a newspaper organization working with an online site);

Zillow.com said the deal covered 11 publishers including EW Scripps, MediaNews Group, Hearst Newspapers, Lee Enterprises and Media General, but did not disclose financial details.

Under the terms of the deal, local advertisers who place their print and online listings with the newspapers including the San Francisco Chronicle and The Tampa Tribune can choose to have those ads displayed on Zillow, which receives 4 million visitors every month.

Zillow's deal is similar parts of an agreement that about 20 newspaper publishers have entered into with online search and media company Yahoo.

Under the terms of that deal, newspaper Web sites use Yahoo's HotJobs online employment classified ad technology, while Yahoo displays ads bought on local papers on its own Web site.

Such deals help Yahoo and Zillow extend their reach into local U.S. communities, while newspapers benefit by getting exposure for their ads on a national online ad platform.

I have written many times about newspapers not getting it, and losing billions in advertising revenues to online alternatives like craigslist and Monster.com. In fact, newspapers lost $3.1 Billion in advertising,  while online advertisers gained $3B.

Maybe there is hope for newspapers. These two deals are a good sign that they understand the need for change. I have written before that local newspapers should "own" the local search and classified market. The local newspapers have a trusted brand name, a long history with advertisers, and significant assets. They have let the online opportunity slip through their fingers. Maybe these two deals signal a change in thinking. Do you think your local paper will make a move online? Or, is it too late?

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Internet Advertising spend sets another record

The Internet Advertising Bureau announced today that Internet advertising revenues exceeded $5.2 billion for the third quarter of 2007, representing yet another historic high for a quarter and a $1.1 billion increase, or 25.3 percent, over Q3 2006.

This is why Microsoft acquired aQuantive , an online advertising and marketing company, for approximately $6 Billion in cash. aQuantive is primarily known for its three brand names; Atlas and DRIVEpm for advertisers and publishers, and Avenue A / Razorfish, one of the largest online ad agencies.

Huge growth ahead - The forecast calls for continued growth, doubling in the next four years. Today less than 10% of all ad spending is allocated to online advertising. Newspapers, magazines and TV are just starting to feel the pinch of advertisers moving more of their ad budget online. Newspapers lost $3.1 Billion in ad revenues last year...mostly to online ads.

Data center power outages and down time

RackSpace, a web hosting data center based in Dallas had a major power outage yesterday. The outage affected GigaOm, Laughing Squid, 37 Signals, and many others. TechMeme, my favorite blog news aggregator, has lots of blogs following the story.

You might recall a similar massive power outage a few months ago at 365 Main, a major data center in San Francisco. That outage knocked out sites like CraigsList, Technorati, LiveJournal, TypePad, AdBrite, Second Life and Yelp.

You might ask where is the backup power supply? Where are the redundant systems they told me about? Unfortunately, these power outages and unplanned down time happen frequently. Most of these web hosting and data center companies are startups themselves. They don't have the "bullet proof" never fail data centers that you read about.

Business users demand 24 X 7 X 365 uptime. This is why Google and Microsoft are building massive data centers costing $500 million each all over the country. There are only a few companies in the world that have the financial resources to build multiple data centers, and that have the technical skills to keep them running efficiently.

Free services and social networks can get by with some power outages and a few data losses. Users will complain...but life goes on. Not so with business users. There are huge impacts, both financial and legal, when service is interrupted or data is lost.

Software is increasingly moving towards hosted services. Microsoft is working hard to deliver "Software + Services" to give users the best of both worlds. Keeping data synchronized on clients and servers, and delivering a great user experience while on-line and off, is a big challenge.

The Dallas and San Francisco data center crashes may make people stop and think about who they want to trust with their data and services. That is why Microsoft and Google are spending billions on data centers.

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Seesmic with Halley Suitt

Halley Suitt, formerly of Top 10, now founder of Zindicate, introduced me to Seesmic.. Seesmic, founded by Loic Le Meur, currently in private beta, might be described as Twitter meets YouTube.

Halley did a quick video with me to show how it works. She used the camera and microphone built into her laptop to shoot the video. She pressed submit, and within seconds it was published on the web site. The videos are searchable, and you can follow the video postings of your friends. These are very short videos that are fun, informative, whacky, and interesting.

Seesmic - the Twitter of video? The videos are a lot like Twitter in that people use video to communicate with each other. The videos almost become a running conversation. Short, quick bursts that are funny and sometimes informative.

Can UGC video be interesting? Halley showed me several of her videos on a whole range of topics. Halley is incredibly talented, inquisitive, and funny, so I would watch any video from her. Loic Le Meur, founder of Seesmic, is also an incredibly entertaining guy, and produces great video too. After watching their videos I was hooked. But, will the public at large produce compelling video? I don't know, but I am going to keep an eye on it. I have signed up for the private beta and look forward to trying it.

Porn and Spam? I asked Halley how Seesmic filters out porn and spam. Perhaps because Seesmic is in a private limited beta there isn't any porrn or spam to be found. Once Seesmic opens up to the public they need to be sure they have strong filters. The video goes up so fast, almost instantly, that I can't imagine they process it through any filters. Loic, any comment?

Business model? I am looking forward to using Seesmic. It is free. But, I wonder what the longer term business model will be. It is incredibly difficult to target advertising to random UGC video. YouTube hasn't done it, and I am skeptical that the economics of ad revenues to costs will work out. Maybe a new revenue model will emerge.

What do you think? Do you use YouTube or Twitter? Would you click on ads, or watch video ads pre-roll or post roll? What business models will emerge?

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