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How vulnerable is Google? June 4, 2012

Posted by David Card in Uncategorized.
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Last week, Google received an ultimatum from the European Commission’s antitrust head. Simultaneously it re-introduced its vertical shopping search site as a pay-to-play program for merchants. Regardless of whether you think it is “evil” or not, Google has shown a lot of me-too products with lagging innovation. While it’s a mistake to characterize Google as a one-trick pony, it’s worth examining just how vulnerable Google may be in its core businesses.

There is no predicting how government regulations and lawsuits will turn out, but there’s no question Google faces a mess of them. Gigaom Pro analyst Greg Sterling thinks the EC may be bluffing a little, as it is offering Google a chance to accommodate or settle early, even as it threatens massive fines. Google has already made some changes to its controversial “Search and Your World” results page re-design that appeared to favor Google services in the name of personalization. There’s likely some more room for give and take, though Sterling’s probably right that Google will have to go to court over search neutrality. Meanwhile, Google probably won’t have much luck making Microsoft and Nokia look anti-competitive to European regulators. But at least Google appears to be winning its expensive battle with Oracle over Java copyrights and patents.

Google used to deride “paid inclusion,” whereby sites pay search engines to guarantee their content is indexed speedily. It denies that its revamped Shopping program constitutes paid inclusion, but Google is arguing semantics here. It is charging for listings, and it will show some of these listings on its mainstream search results page. Initial reactions from merchants and retailers are mixed. Some think the new program will offer better control and analytics, but no one knows what will happen to between Google Shopping and SEM, or how conversion rates might be affected.

Signs of desperation?

Is Google franticly searching for new revenues? Is that why it is replacing a free service with a paid one for the first time, and why it seems vulnerable to antitrust charges? Its core businesses seem safe, with spots of accelerating growth:

Google is trying to charge for some platform services – but API fees for Maps may chase developers to alternative suppliers. Likewise, much of Google’s Android success is based on its open source model. There’s pressure on search click-through volumes and pricing coming from mobile. Google says web search is increasing, but is cagey about sharing actual numbers. While it’s safe to assume mobile activity is additive to web activity now, that’s a condition that could change in 24 to 36 months. And mobile’s where the growth is. Google’s core businesses are pretty secure, but it needs to tap into new budgets to accelerate growth: brand advertisers are a better fit for its sales force than enterprise IT departments.

Question of the week

Where will Google find growth?

Browser wars, part IV May 29, 2012

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Yahoo seemed to be taking a page from an old 20th century playbook last week when it introduced Axis, its browser/search hybrid app for iOS. And there’s a rumor circulating that Facebook might be looking at acquiring Opera. Does this mean we’re about to enter “Browser Wars, Part IV?”

Eighteen months ago, I wrote a short piece of analysis arguing that browsers don’t matter anymore. My thesis was that major technology platform providers like Google, Apple and Facebook weren’t using browsers as a key distribution channel or developer strategy for their APIs. Browsers might still play a role, I wrote, by offering a development platform to help alleviate fragmented operating system markets like mobile phones and connected TVs.

Has much changed since then? Microsoft has lost a little market share in desktop browsers, but the most established market tracker still has Explorer with a 30-point lead over Firefox and Chrome. OS and browser are tightly integrated for mobile phones and tablets, and we might even see that pattern re-emerge in desktop operating environments.

Yahoo’s chances

So what is Yahoo trying to accomplish? Shouldn’t the troubled portal be concentrating its allegedly mobile-first strategy on apps that have a chance? Like, for instance, its Livestand newsreader? Oh wait, it just killed Livestand.

Axis is getting surprisingly good reviews. (So did Livestand.) But when implemented as an app for iOS, it’s less a full browser than a skin on Apple Safari. Axis uses Safari’s rendering engine, and doesn’t override Safari when other browser-related functions come into play, like posting updates or photos. Axis is an intriguing search and web navigation app that presents page images rather than links as results, remembers a user’s search history across devices and enables a personal home page.

Axis gives a slick demo on an iPad. But page thumbnails are an inefficient way to display search results on smartphone screens, and there’s no evidence that Yahoo is tuning results for mobile use by, for example, re-ordering results based on GPS data. The success of Axis will depend on whether users perceive its approach to be fun or offering utility. Axis may be fun to use on a tablet, but it doesn’t stack up well against recent social search initiatives from Microsoft or Google easy-answer utility.

Surprisingly, although Yahoo is talking about the potential of Axis advertising, it’s not showing any ads or paid search results right now. That’s odd, since tablet ads might command a premium for their novelty and potentially rich interaction. Yahoo’s leaving money on the table and potentially taking away revenue opportunities for Microsoft, its search partner.

Browsers as platforms

If Axis catches on, it might increase usage of Yahoo search and content. But Yahoo appears to have wisely abandoned any notions about being a technology platform provider. It is not using Axis as a package of APIs connected to Yahoo services upon which third-party developers build apps.

Facebook is a another story entirely. I’ve written before about why Facebook would like to deploy its platform on devices via a somewhat site-centric HTML5 strategy, to ease multiple-OS support and get around app store restrictions. Its intent to buy Instagram and its own Camera app probably indicates bridge tactics toward that longer-term strategy.

Right now, Facebook mobile performance is poor. For security reasons, Apple restricts how apps use Safari’s rendering and JavaScript engines. Safari and other browsers use just-in-time compiling that enables applications to run faster by optimizing on-the-fly for particular hardware configurations. Opera also relies on a fast rendering engine and server-side caching for performance. Facebook might indeed benefit from access to those kinds of technologies. If it does acquire or build a browser, though, Facebook should “disguise” it as a speedy app, rather than trying to steal usage away from the device’s default browser.

Question of the week

Does Facebook need to own a browser?

First take: Google Drive April 30, 2012

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Last week, Google introduced its would-be “Dropbox killer” cloud storage service, focusing on fairly aggressive pricing and integration with both its own and third-party services. Google Drive joins a crowded field that’s polarizing between consumer and corporate offerings, even as all the corporate entrants latch on to BYOD and consumerized IT trends as entry points into enterprise collaboration. Google is big enough to try to service both customer bases, but its lack of focus leaves a lot of room for competitors to differentiate.

What it means

Although Google might seem late to cloud storage, we’re still at the early stages of market development. According to our GigaOM Pro 1Q12 consumer survey, only 8 percent of online adults regularly use such services. Likewise, a GigaOM Pro survey of business executives conducted in the fall of 2011 showed that e-mail is still the primary means of sharing business content both within and outside of organizations, with web-based storage services used internally by 27 percent of the survey base and externally by 19 percent. There’s plenty of room for competition and differentiation.

Google is positioning Drive equally for consumers and consumerized enterprise collaboration via its application integration – Google Play for consumers and the Google Docs collection for company functions. Google Play is off to an inauspicious start, with music and books going nowhere and mobile apps and games – which don’t need personal storage anyway – potentially fragmenting. Google Docs is gaining traction in basic business collaboration through file sharing. But Gmail integration is oddly absent from this release. Google is fleshing out an API and developer kit for Drive, and offers some nice features like easy faxing through third party apps.

Don’t focus on price per gigabyte or how much free storage each competitor offers. Even the startups can match current price points. This won’t be battle of sheer storage scale unless a competitor offers near infinite capacity for free. Similarly, a diversity of mobile and desktop OS support is only table stakes. (Google Drive lacks an iOS app.) Consumer cloud storage differentiation will depend on easy to use, seamless synchronization and bundling storage with existing content and media offerings. Google looks weak relative to Apple and Amazon here. The suppliers aiming to power connected work will differentiate via integration with existing collaboration and content management applications, premium customer service, and suites of features geared to specific business functions or vertical markets.

Whom it affects

Dropbox is the most familiar name in the space. It recently added easy-to-use sharing technologies and photo and video support, and responded to Google pricing. Its offerings for corporate collaboration are thin, though its brand recognition and installed base may be enough to fuel a robust third-party ecosystem.

Box is farther along than Dropbox on incorporating support for enterprise features and integrating with existing applications and directory services. Box may rely a little too much on APIs for integration, but it has shown it will build out connectors to enterprise applications like Salesforce and NetSuite as necessary.

Apple has aimed iCloud solely at consumers to-date, and offers industry-leading synchronization features in support of music, video, e-mail and consumer contacts. As usual, Apple plays by its own rules and favors synchronization over cloud storage, but that hasn’t proven to be a limitation yet.

Microsoft is rolling out features for its consumer-oriented SkyDrive service and may at some point connect some dots with SharePoint and its enterprise cloud services. Microsoft might be smart – rather than slow – to distinguish between consumer and enterprise/small business offerings.

Others in the cloud storage space – including Egnyte, Syncplicity, YouSendIt, SugarSync, Citrix and Amazon – should also pick their battles.

Key takeaway

Consumer adoption was a side-door entrance into enterprise collaboration for the early players in cloud storage. That won’t work anymore; differentiation will come from integration, premium services and suites of features.

Disclosure: YouSendIt is backed by Alloy Ventures, which also backs GigaOmni Media, the parent company of GigaOM Pro and GigaOM.

Question of the week

Can Google Drive win over both corporate and consumer customers?

Potential Facebook-Instagram impact April 16, 2012

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It’s been a week since Facebook announced its blockbuster $1 billion planned acquisition of Instagram, plenty of time to sketch out what it means for Facebook and the mobile social media environment. Don’t be too quick to assume that Facebook is abandoning its HTML5 mobile strategy in favor of apps. As a defensive move, the acquisition would lock down Facebook’s strong position in photo-sharing, leaving little room for would-be competitors, but it gives Facebook few new weapons and no new revenue opportunities.

What it means

It’s too easy to say Facebook will steer its mobile strategy towards apps and away from mobile access to HTML5 websites. Letting Instagram thrive as an app still fulfills the three strategic objectives I said Facebook needed from mobile: ubiquitous access and high frequency usage, a common cross-platform user experience, and distributed technologies that reinforce its platform. Facebook is still counting on HTML5 to minimize development fragmentation across mobile operating systems and the web. Especially since such a framework would better allow it to apply its Credits virtual currency and payments system broadly, without giving Apple, Google or Amazon a cut. Facebook is trying to encourage app and web integration with discovery services, test suites and streamlined payments. Instagram’s limited use of its own APIs could tie into Facebook’s own social services.

Instagram’s app is simple and elegant, two things you don’t hear about Facebook’s app or its mobile website. But Instagram also uses core social networking techniques that shouldn’t be overlooked. In his post on the announcement, Facebook CEO Mark Zuckerberg differentiates between sharing photos with friends and family versus sharing based on interest. And Instagram uses asymmetric following as Twitter does, rather than Facebook’s primarily two-way following system. Over time, those social networking technologies could add more to Facebook’s social graph than additional location data.

My initial reaction to the announcement was that Instagram might be worth a billion dollars to someone, but not to Facebook. I thought the two companies’ customer base probably had a lot of overlap – so that Facebook wouldn’t necessarily be gaining 30 million new users – and that thousands of Instagram photos were already stored on Facebook pages. Recent figures from AppData suggest that 22 percent of Instagram users connected their app to Facebook. That overlap will increase as Instagram gains more mainstream users: Contrary to potential backlash fears, Instagram received an additional growth spurt from the Facebook announcement on top of its first Android app. Already 96 percent of U.S. social network users, ages 18 to 34, uses Facebook, according to our GigaOM Pro 1Q2012 consumer survey, so there’s minimal Instagram headroom.

Instagram doesn’t have any revenue streams itself, so it won’t solve Facebook’s lack of mobile monetization. Facebook has resisted showing ads on its mobile app or mobile website, and seems more likely to show in-stream promotions than mobile display ads or interstitials between photos. What Instagram does give Facebook is a near dominant position in photo-sharing, both mobile and online. Both Om and investor and Hunch co-founder Chris Dixon saw Instagram as Facebook’s biggest competitive threat.

Whom it affects

Google missed out on a chance to gain social media customers and attack a core Facebook stronghold. But Instagram won’t add enough user data to Facebook’s interest graph to weaken Google’s.

Twitter reportedly tried to buy Instagram, and it would have welcomed the user growth and bulked up its own nascent ambitions in photo sharing and storage.

Apple doesn’t make many apps, but desktop photo manipulation and management is one of them. Instagram would have been an easy fit, offering lots of integration opportunities and bringing much-needed social DNA to Apple.

Yahoo’s Flickr is still a huge web repository for photos – including ones taken with Instagram – that could have benefited from a mobile user base.

Other smartphone photo apps like Hipstamatic and Eyeem don’t have the size or growth rates that Instagram has. There’s very little reason for any of the previous group of companies to buy any of them rather than building their own app.

Other social startups might now be in play if the bigger companies above decide they need social media users. But Pinterest is really the only one with size, growth and potential ease-of-monetization. And Facebook still has plenty of money and stock.

Key Takeaway

Although Facebook is still committed to an HTML5-based mobile web strategy, keep an eye on whether it shifts towards a series of single-function mobile apps as a medium-term bridge tactic.

Question of the week

Who is the biggest loser from a Facebook-Instagram match?

Rating Google glasses for UI innovation April 9, 2012

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Last week, when Google released a concept video on how augmented reality glasses might work, it caused reactions ranging from skepticism to premature predictions of market mayhem. And parodies; lots of parodies. Should the industry take “Project Glass” seriously? Does Google have a truly disruptive user interface technology in its labs?

Certainly Google must overcome major technology and design barriers before bringing even a prototype to market. If any products show up this year – and Google’s not even hinting at how they might roll out – they’ll probably resemble location-based overlays of info snippets and alerts related to phone-based messaging. Think heads-up display of caller ID, text messages and, possibly, targeted local offers, rather than the voice-activated virtual agent of the vision video.

But implementation aside, does the video show that Google is thinking about a UI that could truly drive innovation, or is it just impractical science fiction? I’d say it is the former, based on key factors present in the groundbreaking UIs of MacOS, iOS, Nintendo consoles and Microsoft Kinect:

  • Input and output. Siri isn’t just speech-recognition. Besides the fact that it is doing lots of semantic analysis behind the scenes to figure out which sources to search and which apps to launch, Siri offers audible answers and follow-up requests for further detail. It’s that two-way give and take that makes it a potential game-changer versus voice-to text input mechanisms on other phones.
  • Contextual optimization. Early desktop GUIs were well suited for their device (keyboard, big screen, mouse) and their function (general purpose application and file management, personal productivity). Some day on-screen TV navigation will be optimized for genre and visual browsing based on personal preferences via remote as well as iOS is for laptop tablet browsing and light communications.
  • Easy-to-learn. Innovative UIs can gain fast adoption via the use of metaphor the way desktop GUIs mimicked documents, files and folders. Or they can teach users how to use new techniques the way videogames present training missions or simple tasks to gain familiarity.
  • Practical-to-use. There can be a big difference between easy-to-learn and easy-to-use, or rather effective-to-use. The UIs that gain the most widespread use can gracefully move from one to the other. Keyboard shortcuts and macros may be powerful, but they’re too hard to learn for the masses.

How does Project Glass stack up?

Go back and re-watch the video. Google shows glasses that blend the heads-up display of contextually relevant information and application options with voice-command based input. The applications it features are optimized for on-the-go activities like mapping and communications rather than, for instance, gaming or Google Docs. The augmented reality approach, where presumably camera, image-mapping and GPS are combining to identify relevant apps and information does all the work for the user, minimizing the need for training or, for that matter, proactive input. Google’s ideas seem aligned with all the necessary factors for innovative UIs.

But what of Google’s track record in user interface design? Android, Chrome and Gmail are competent implementations of principals invented elsewhere. Google’s UI leadership example comes from search. There’s no question that Google taught the world how to navigate the web through hyperlinks resulting from typing in one or two words. Google has de-emphasized approaches such as Q&A (Ask, Quora), faceted results from multiple filters (Best Buy), or visual cueing (Search-cube, Grokker) in favor of “guessing right” in the fastest manner possible. That explains Google’s ham-handed attempt to integrate its user and social media data to personalize search results.

So Project Glass aligns with the critical UI factors and it plays to Google’s strengths in user interface and its data, mapping and communications expertise. Apple’s own concept video for the “Knowledge Navigator” debuted in 1987, but it was set in September 2011. The company showed the iOS 5 iPhone with deep Siri integration in November 2011. I don’t think it will take Google 24 years to show results from Project Glass.

Question of the week

Will Google be able to do anything with its glasses?

Facebook’s app ecosystem is still missing a piece of the puzzle January 23, 2012

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At its f8 developer conference last September, Facebook CEO Mark Zuckerberg laid out a grand vision of a new class of lifestyle apps enabled by Facebook’s technology platform. Last week, at a subdued event that attracted far less media coverage, Facebook sketched out its progress and showed some 60 apps. Facebook’s apps ecosystem is showing positive signs of evolving, but it still lacks an effective marketplace for app promotion and monetization. Such a marketplace would reinforce a virtuous circle: It would attract more developers and help generate more money for them and for Facebook.

Signs of progress

You will recall that one of the powerful — and potentially creepy — features of Facebook’s Open Graph was “frictionless sharing,” where apps could automatically post user activity without requiring the press of a Like button. Facebook has done some fine-tuning to its privacy and auto-sharing controls, including prominent instructions on how to opt in and how to focus sharing among particular friends, even for existing apps. But Facebook still mostly relies on users’ increasing acceptance of activity broadcasts. That seems appropriate for all but the most privacy-conscious rights organizations.

Facebook also has opened its apps approval process, offering simple guidelines that appear less restrictive than, say, Apple’s App Store. Facebook claims it wants to open up the ecosystem, but it remains to be seen if it has the staffing needed to enable speedy approval for hundreds of apps.

Developers appear to be excited about Actions, a key new technology from September’s announcement. Actions expands the vocabulary of sharing beyond Liking and Sharing to shopping-oriented terms like Own and Want as well as the media-focused Listen and Read, adopted successfully by the first wave of new apps like Spotify (which has added 4 million users since f8) and Yahoo (which has enjoyed a sixfold increase in referrals). Developers like Facebook store builder Payvment think these new Actions will better suit commerce and shopping than Likes, while others like Foodspotting expect them to broaden the type of activities people use their apps for. Even if generating transactions on a social network remains a challenge, Facebook’s new tech seems to be gaining developer attention. Ticketmaster’s new app even mashes up Actions to present concert information based on listening behavior, a smart idea.

Missing marketplace

My GigaOM Pro colleague Greg Sterling wonders if Facebook is poised to challenge Apple and Google in app stores. Facebook’s app ecosystem has already produced Zynga, a bigger company than Apple’s biggest star, Rovio, but I would estimate Facebook’s yearly take from virtual goods sales is measured in the low hundreds of millions of dollars, while Apple’s apps and music sales approach $1 billion a quarter. That is partly a function of app volume, but, just as important, Facebook lacks a store or marketplace to focus app discovery and sales.

Facebook told Sterling that a marketplace “would probably make sense at some point.” OK, but pointing to apps from an About menu link is no substitute. Right now, Facebook depends on Likes and frictionless sharing by friends to drive app discovery. Facebook filters a very limited number of app activities into a user’s news feed: Users spend the plurality (27 percent) of their Facebook time there, but Facebook doesn’t want to clutter or spam their major communications stream. The company is adding features to display app activity on profile pages, where users spend 20 percent of their time. In other words, Facebook is working hard on viral app discovery among friends, but it has a weak story for a user who wants to explore related interests outside his own circle of friends.

What Facebook needs is an app store with the necessary merchandising. Facebook should copy Apple, Amazon and Best Buy. That means featured products, apps ranked by category and popularity, sortable consumer ratings and reviews, and a merchandiser’s “editorial” voice as well as algorithmic promotion, sales on virtual goods, and so on.

Facebook’s marketplace should also do something that the others don’t. It should emulate paid search listings and enable developers to buy prominent promotional positioning via auction. Sure, that entails some serious effort, but Facebook has tons of user behavioral and preference data it could use to enforce paid link relevance to eliminate scams, spam and irrelevant promotions. This would be bold app store differentiation, and perhaps Facebook is nervous about appearing to be “for sale.” But paid promotions aren’t payola if they are transparent and fair, with enforced relevance.

An effective apps marketplace would accelerate the growth of Facebook’s ecosystem and add revenues for Facebook and for developers. With its expanded Actions that crucially work outside the Facebook site, Facebook could effectively extend its marketplace web-wide and build momentum for a potential mobile network.

Question of the week

How else could Facebook juice up its apps?

Virtual currencies: from coins to barter December 19, 2011

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Social gaming star Zynga’s IPO last week casts the spotlight on its virtual goods business, which accounts for 95 percent of 2010’s $597 million in recognized revenue. The company’s broad appeal made me wonder, How do virtual currencies work today and where, outside of gaming, might they be effective? Right now, practical alternative payments systems like Facebook’s and PayPal’s are still based on cash, though consumers might like bartering and loyalty programs rolled into the mix.

Virtual goods and currencies are a potent combination. U.S. sales of virtual goods were $1.6 billion in 2010, and they were projected to grow to $2.2 billion in 2011, according to a report from Inside Network. Zynga is the biggest player, and its transactions run exclusively through Facebook’s Credits, which takes a 30 percent cut. Until it builds out its own gaming site, Zynga remains dependent on Facebook and on its so-called “whales,” the relatively few — reportedly 1 percent — of Zynga players that account for 25 percent of spending (perhaps 10 to 20 percent buy anything at all). These kinds of ratios and pay rates are pretty consistent across both virtual goods and paid content categories like digital music, video and news, from what I have heard and according to a PayPal survey in GigaOM Pro research.

Based on that survey, two features look critical for virtual currency systems: They should offer loyalty programs like frequent-buyer benefits, and the systems should work across different goods suppliers. The latter is one of the main reasons Facebook rigidly enforces Credits exclusivity for apps: The same accrued Credits can rent streamed videos or buy power-ups and game paraphernalia. The PayPal survey showed that a relatively high 36 percent of social gamers said they would be more likely to purchase virtual goods if they could earn loyalty credits for frequent purchases. And 22 percent said they would if they could use the same payment product for all games. Those rates were similar or higher for hard-core gamers as well. The frequent-buyer program angle was even more popular for other paid media like video (45 percent) and music (52 percent). Amazon and Apple should pay attention.

Companies offering new virtual currencies often promote two other features: micropayments under $1, which aren’t cost-effective with credit card fees, and the ability to base currency value on something other than money, including “bartering” user time and attention as well as other goods. No one has ever proven the value of micropayments. Failures include Beenz, Flooz, Millicent and others, though Flattr is still trying. That’s mainly because there aren’t that many things Americans buy that are worth less than a dollar. Music stores try to scrape a margin from 99-cent singles with prepaid PayPal accounts or by bulking up orders, and prices are moving to $1.29.

But there are some hints of promise in basing virtual currencies off something other than money. I’m not talking about Bitcoin, no matter that VC Fred Wilson thinks Bitcoin is potentially hugely disruptive. In its tortured history Bitcoin has suffered massive fluctuations in value from hoarding and has had its brand tarnished by its reported use by drug dealers.

In contrast, currencies based on barter look more interesting:

  • TrialPay is experimenting on Facebook and elsewhere with a variety of bartering options. Users can earn gaming goods for making purchases or watching ads, and they can trade in credits for coupons redeemable for real-world products like soda and cosmetics. Facebook is a promoter, and TrialPay claims to have 100 million users and 2,000 advertisers.
  • Jun Group recently raised $2.5 million to boost its ad serving system, which trades currency credits for viewing video ads. It claims a high 70 percent completion rate for viewing. Jun Group has worked with big brands like HBO and Frito-Lay.
  • Quora, the Q&A site, rewards behavior like answering questions and getting positive votes with credits that users can use to promote their own questions, so they have a better chance of being answered. The system reinforces expertise and participation, so it isn’t likely to migrate outside Quora. But other participative activities like reviews, recommendations and polling could apply similar techniques. Companies with consumer review systems like Amazon, Yelp and Angie’s List could use currencies to reward quality reviews, as determined by voting.

Yes, there is some evidence that users undervalue goods they have earned for actions. Users uninstall a lot of those apps, and Apple has banned trading goods for downloading an app, because developers were using the practice to game the App Store’s popularity ranking. But overall, barter-based currencies appear to be gaining momentum. If Zynga wanted to launch its new site with a bang, it would deploy a new virtual currency scheme that worked across third-party games and maybe even other products, support a frequent-buyer program and let users exchange their time and attention for credits.

Question of the week

What other kinds of products could use virtual currencies?

Why we should separate the real platforms from the pretenders December 5, 2011

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Everybody wants to be a platform. Spotify, the hot digital music service, is the latest company to sketch out a platform strategy. But building a real platform takes more than throwing out a few APIs and saying, “have at it.” To achieve business objectives like revenue growth, customer acquisition and network effects, would-be platform suppliers have to deliver audience, distribution and revenue potential.

Tech market observers use the term “platform” in a variety of ways. What I’m talking about here is a technology platform with application programming interfaces (APIs) that developers and sites use to build or enhance their own applications and services. On the consumer web, even a company with an industry-leading audience is vulnerable to competitors that supply better platforms. Myspace’s failure and Yahoo’s malaise are attributable to Facebook’s and Google’s platform prowess. Though both companies have or had big audiences, neither built out APIs that would enable distribution, data access or unique technology integration.

A successful platform delivers the following business benefits to its supplier:

  • Low-cost features. Spotify will instantly add a handful of compelling music features (discovery, touring info, lyrics) with minimal development costs.
  • Customer acquisition and retention. Facebook’s games and news apps increase usage duration and frequency, and its syndicated Connect and Like services both attract new users and bring them back regularly to the site.
  • High-margin revenue. Developers like Zynga that use a platform to attain a large audience and big sales don’t complain too much when Facebook takes a 30 percent cut.
  • Network effects. All of the above, along with viral sharing features like Follows, Likes and updates, encourages continuous connections between users and developers. That reinforces the core business and can lead to lock-in and platform dependency for developers and users both. Facebook claims to have 9 million businesses using it for promotion.

To attract developers, a platform must deliver something they want. That can be access to a big or specialized audience, core technologies and services developers can’t build themselves, and/or data, as well as distribution and potential revenues. Here is how some of the platform players in consumer and social media stack up. (A similar analysis framework applies to mobile, e-commerce and enterprise platforms.)


As illustrated, Spotify is delivering a medium-sized audience in a targetable music-fan context, and it has enabled app discovery and sharing. But it falls short on most measures.

Google’s major platform innovation was to deliver an easily accessible revenue stream to its search partners via revenue-sharing from its ad networks. Oddly, it hasn’t done this — yet — for Google+, as it wants to build audience first. Syndicated Google+ services promise indirect revenue benefits through search engine optimization. None of the players are particularly good at developer support, but Google has the strongest analytics tools offering.

Neither Twitter nor LinkedIn focus their platforms on getting apps for their site. Twitter’s platform is all about spreading its content and data to other sites, either through liberally open APIs (though the terms may shift) or licensing via Gnip and Datasift. It’s up to developers to make money. LinkedIn’s content and data syndication is aimed at increasing usage. Its pitch to sites would be stronger if it could build out a professional marketplace beyond hiring or if it exposed more customer information gleaned from its desirable professional audience.

Clearly, Facebook is the current master of the online consumer platform. Its balance of a semipermeable walled garden and widely distributed off-site technologies creates a potent potential for network effects. It doesn’t share ad revenues, but its Credits system enable cross-developer commerce. Companies building consumer platforms would be wise to emulate its tactics and offer competitive differentiation via support, revenue-sharing and specialized audiences.

Question of the week

Which companies are building killer platforms for other market segments?

How to build the ultimate identity management service November 7, 2011

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Identity is an industry. So wrote my GigaOM colleague Mathew Ingram, and it will be a hot connectivity topic at our GigaOM RoadMap event this week. Mathew is compelled by the argument that Twitter is set to be the main supplier of identity, as put forth by Mark Suster of GRP Partners. But I wouldn’t be so quick to anoint Twitter. An identity management service needs to have a variety of features beyond “follow me” and sign-in, and those related to unified communications and commercial functions are better served by an authenticated identity. Companies like Facebook and Google are making big investments in identity, and these services will play important roles in marketing, communications and e-commerce.

By “authenticated” I mean one that is closely associated with a user’s “true” identity rather than a potentially anonymous public persona. The ultimate identity management service might well consist of these features:

Follow/find me. As Suster points out, posting an email address doesn’t work for the Oprah Winfreys of the world. He likes Twitter for its asymmetrical approach: Friending and following can be one-way. Big deal. Google+ has always supported asymmetrical following, and Facebook recently enabled the feature. Both Google (if not Google+) and Facebook have a far broader reach than Twitter. While Apple’s iOS Twitter integration may increase Twitter usage, that’s still unproven.

Sign in/connect. Single sign in is much easier than registering individually for every site and app. There’s a healthy debate over the value of anonymity in the service of comments and general privacy. The “true identity” suppliers value the interest and activity data they can get from tracking users, but they don’t have to sell individuals. Most advertisers want to market to big groups; actual 1:1 marketing isn’t cost-effective for most products. Identity suppliers already anonymize and bundle targets for marketers.

Authenticity. Business transactions like hiring, credit card purchasing, contract signing and the like depend on actual identities. Reputation scoring that is built on anonymous identity works pretty well for user reviews and comments. But it doesn’t work in assessing for-pay skills or job applications, the core business of LinkedIn.

Presence. A key feature of unified communications is the ability for a user to express his availability for different types of communications (email, chat, voice) in real time. Instant messaging and chat — integrated with email by Facebook, Google and others (Microsoft, Yahoo) — handle presence management, while Twitter does not.

Groups. Right now, sophisticated users expose their presence to select groups of contacts manually, by logging into or lurking on different communications applications. As with presence management, group management would be most effective if tied to real identities rather than pseudonyms.

A well designed identity management service would have authenticated identity at its root, but it would support anonymized personae that a user might want to use for different functions: business, shopping, talking trash. The user would have to trust the identity supplier to protect his privacy as needed.

The company that can build such a powerful, flexible service will still have to teach consumers how to use it. Think of the number of variables a user would have to manage: personae, groups, communications mediums, degrees of commercial access, etc. That will be a barrier to mass adoption.

So who’s in the game besides Twitter? Facebook has mass adoption and widespread third-party Connect usage. Google search and mail have reach; Google Voice is richly integrated, and Google+ is promising support for pseudonyms. For professional purposes, LinkedIn has an established, trusted user base. Adding communications brings in the telcos and Apple, which is doing a good job of integrating communications and contacts from multiple sources on iOS. Given the challenges of integrating all of those features and teaching consumers how to use them, plus the possibility of additional entrants, identity services will see further fragmentation for at least the next 24 months before any leaders emerge.

Question of the week

Who do you think will win in identity management?

Google seeks mobile search payoff October 24, 2011

Posted by David Card in Uncategorized.
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At its third-quarter earnings call, Google said its mobile advertising business was on pace to hit $2.5 billion in yearly revenues, and shortly thereafter it launched a handful of new search ads for mobile apps. But that same week, Apple showed off its latest iPhone with Siri voice technology, which has a big potential to disrupt search. Analysts questioned whether mobile search would ever be as big a business for Google as the desktop market. Will mobile search be a bonanza? If so, is Google the company to win it?

Mobile introduces new challenges to Google’s usual strengths in search, but the company is well-positioned to address most of them. And Google is developing a war chest of marketing services that will complement mobile search and help compensate for mobile’s relatively smaller revenue potential.

Here are some of the characteristics of mobile search that make it different for Google:

Siri could be a disruptive force in search because of its role in UI and in the presentation of results. Siri may be evolutionary, but its natural language recognition is generating a lot of iPhone buzz. A Siri query can produce a Google search result, but Apple has also engineered Siri to pull up results from local info provider Yelp and other search engines and sources. Google’s own voice-activated search depends more on structured commands than natural language. Google will need to deliver competitive technology or train users how to use commands.

Google and its search marketing ecosystem are working on mobile results and ranking. Making sites more Siri-friendly requires search engine optimization techniques identical to the ones marketers already use to boost their organic results on Google, so that won’t hurt Google. Meanwhile, Google is tuning its analytics tools and adding location extensions to search ads to assist search marketers with mobile SEO and paid search. And Google is already taking things like proximity into account when ranking mobile search results.

Google didn’t break down its reported $2.5 billion run rate into display vs. search advertising, but it’s a safe bet that the vast majority is search. Meanwhile, Google is adding paid features and services to beef up mobile search transactions. Click-to-call lets advertisers show local phone numbers on mobile search results with pretty positive results. Advertisers like Enterprise Rent-A-Car seem to like Google’s hyperlocal ad features. Presenting deals and offers next to mobile search results will be crucial for enticing transactions, and Google is working aggressively on Offers and a new ad Circular format.

So far, Google is well-prepared to withstand potential Siri disruption, even without counting on Android market share gains. It still needs to improve its own voice-driven search interface, though. Google’s mobile search and ad enhancements will add to its mobile marketing revenues, though they won’t approach search sales volumes for at least three to five years. But Google’s tactics to make search results more local and mobile will guarantee that its own results show up from a Siri call, and they will help dissuade Apple from integrating more Google alternatives.

Question of the week

Will mobile search be a bonanza, and is Google the company to win it?