Facebook’s passive-aggressive friendship
We are witnessing a fascinating changing-of-the-guard moment in tech. The old Internet, represented this week by once-mighty Yahoo, is fumbling with another leadership crisis it must solve before it can even think about restoring some semblance of relevance. The new Internet, Facebook, is ruled by a young man in a hoodie who is on the verge of creating a massive public company that, as was the nascent Yahoo back in the early ’90s, will be an Internet darling longer on potential than track record, but running hard on an open field.
The common thread might seem to be the “If it’s big, it’s gotta be BIG” illusion that got us all in trouble at the turn of the millennium, when Internet investment hysteria equated today’s eyeballs with tomorrow’s profits. But it’s always about the profits, and the people who promise them. This time that person is Mark Zuckerberg, who as the books on the Facebook IPO closed Tuesday, well in advance of Friday’s first trade, seems to have convinced Wall Street that his seven-year-old company could be worth more than $100 billion — the richest-ever launch in Silicon Valley.
When you value your company at 100 times revenues, investors are banking on the belief that Zuckerberg has perfected the unstable compound that is social abandon and advertiser hunger.
Search remains pretty much the top use of the Web (as opposed to the Internet) – the gateway to everything else. The other big use is now social, which was invented on the Web but whose chops will be tested in the app schoolyard that is the mobile Internet.
But thus far, advertising works better on search than social. Google makes about $40 billion a year, almost 100 percent on ads. Facebook is reporting last year’s revenues at just north of $1 billion $3.7 billion. Google has a market cap of roughly $200 billion – so it’s twice as big as Facebook’s IPO valution and makes 40 times the money more than 10 times the money.
While Facebook is very successful, the question is: at what? It’s great at creating a community of time-wasting freeloaders, but it needs to be good as an advertising medium to be worth anything to the institutions falling all over themselves to get in on the ground floor of its stock.
To compare the new and the old way of tech, let’s just say, for the sake of argument, that there are two kinds of Internet companies – Googles and Facebooks.
Instagram’s Facebook filter
The startup had millions of users, but, from the beginning, just one customer.
The predominant way of interpreting Facebook’s billion-dollar purchase of Instagram, in light of the social-networking giant’s forthcoming IPO, is that Mark Zuckerberg had to pick up the photo-sharing app to boost his company’s mobile engagement. That would allow him to guard the mobile flank against incursions from Google, Twitter, and whatever other social-media tools might next arise.
That may be true – and it may even be the way Zuck thought about the deal when he swallowed hard and ponied up the purchase price. But that way of analyzing Facebook’s pickup, and the pickup of dozens of other startups, not just by Facebook but by Google, Twitter, LinkedIn and others, is probably not telling the whole story. Here’s a different theory, one that better describes the tech world that we, the users of the Internet, now inhabit: Instagram may have had millions of us as its users, but it was really built for just one customer: Facebook.
Silicon Valley, for too long, has confused the issue of what it means to be a user of a website, service or app, and what it means to be a customer of the app. Intuitively, you’d think they would be one and the same: The person using the app is the person consuming the app. But increasingly, apps are being made to grab the attention of the hegemonic companies in tech. Whatever it takes to get bought.
Sure, startup CEOs are careful to refer to their user bases as just that – users – but even when money changes hands, those users are cattle to be herded toward a cell on a venture capitalist’s spreadsheet, to help the VC decide whether to fund another pivot, engineering acquisition, rack of servers, whatever. Users are just another dart, basically, that startups have to hurl at the bull’s-eye and ensure success.
A colleague of mine tells a story: You can tell when a tractor was made to be purchased by a farmer, and you can tell when a tractor was made to be purchased by a corporation to be used by its employees. Tractors whose users are also the customers come equipped with every convenience, from a satellite radio to Wi-Fi to all the cupholders a farmer could dream of. They drive well, and their controls are intuitive, because that’s what the average tractor driver wants, and what the tractor competition provides. Tractors bought by companies, for earthmoving, rock breaking and the like, come equipped with nothing but a hard seat and a prayer. Employees – mere users – don’t get any say on the amenities, or lack thereof.
A looking glass into the post-smartphone era
Permit me to not act my age.
I was all grown up already when the Internet became a big deal, scarcely two decades ago. I was like a kid in a candy store. Still, I’ve only had a couple of heart-stopping moments in those 20 years in which everything has changed.
My heart skipped a beat (along with probably only thousands of others) when I downloaded Mosaic, the first Web browser, on the first day it was released. It consistently froze up. But that small, terribly flawed piece of software was really a time portal, showing me the future, and I could barely breathe.
Two years ago I got my hands on the first iPad on the first day it went on sale. My unboxing was unceremonious because I had to rush and show it off during a couple of TV interviews. But when I got home late on that Saturday in April and finally had a chance to put it through its paces, it took my breath away. I was a kid again: full of wonder and utterly immune to negativity.
Call me childish, but I had the same primal reaction to the video, and the reporting of my Wired colleague Steven Levy, on Google’s Project Glass. As Levy writes, Project Glass is “an augmented reality system that will give users the full range of activities performed with a smartphone – without the smartphone. Instead, you wear some sort of geeky prosthetic (one of those pictured is reminiscent of the visor that Geordi La Forge wore on Star Trek: The Next Generation, but Google has also been experimenting with a version that piggybacks on regular spectacles).”
The augmented reality features in Glass aren’t new. Bionic Eye brought AR to the iPhone in 2009: You held up the phone at eye level and nearby points of interest floated through the camera’s lens. Sekai Camera, an augmented reality smartphone app, not only provides a heads-up display of information but also adds a social element. Yelp tossed in Monocle, another augmented reality feature, as an Easter egg in its app. Heck, in December 2009 Wired highlighted the seven best augmented reality apps for iPhone and Android.
Boohoo for Yahoo
Yahoo is taking on Facebook — but it’s not vying for the hearts and minds of the Internet cool kids. It’s for licensing fees over some patents. This is not how it was supposed to be.
No, I’m not naive. But I am a bit of a romantic. Thing is, I remember when Yahoo was an upstart with two crazy awkward college kids who came up with something that the search giants of the time — Lycos and Alta Vista — could not withstand. Yahoo’s scrappiness was part of a long tradition of Silicon Valley startups that came before (and would come after). Like Bill Hewlett and Dave Packard, the elder statesmen of Silicon Valley who began their iconic company in a now iconic garage, Jerry Yang and David Filo started with nothing but an idea in a dorm room and changed everything. Yahoo’s blazing success in search and (the now-quaint notion of) cataloging the Web begs comparison to two other crazy awkward college kids who started a search engine. That search engine, of course, killed Yahoo. It had an equally kooky name — Google.
Now Yahoo, as part of its effort remake itself after a decade of decline, is said to be wielding a new weapon: a patent trove. The stellar DealBook blog of the New York Times, which first reported this story, couldn’t get anyone to disclose the particulars, but it quotes “people briefed on the matter” as saying Yahoo is threatening lawsuits and is in the midst of negotiations with a pretty big fish. “Yahoo is seeking to force Facebook into licensing 10 to 20 patents over technologies that include advertising, the personalization of Web sites, social networking and messaging,” DealBook reports.
Oh, how the mighty have… matured, to be charitable. Yahoo was crazy disruptive before “disruptive” was even digerati shorthand for “cool.” It was so popular that Reuters — yes, this Reuters — took a sizable stake in the young company. The American executive who made this happen, Andy Nibley, delighted in telling the story of how the very British Reuters board received the news he was investing millions in a company named “Yahoo!”
For years the two companies closely partnered to create wicked revolutionary news services. I know this because I was the lead guy on the Reuters editorial side in those heady days, collaborating with some daring executives and talented engineers at Yahoo’s Mountain View mecca.
Hey, we all grow up. We get married, get car loans, take on a mortgage. We become, as my closest comrade from those days (still a dear friend) never tires of reminding me, “not the demographic they care about.”
Love your title here, Reuters! I just set up a ranting account and website with the name of http://www.boohoosoo.com.
I chose yahoo for this, and am migrating my gamil slowly to yahoo as an alternative.
May Yahoo make wiser decisions about privacy concerns than Google, and remember that people are behind those screen names! Respect! (something learned with maturity.)
http://about.me/boohoosoo.com
Google’s unhealthy cookie habit
Google got its hand caught in the cookie jar last week — and this time it really does have some explaining to do.
The search giant, which derives some 97 percent of its revenues from advertising, thought it would be all right to circumvent some protections incorporated into Apple’s Safari browser so that it could better target its ads. By intentionally bypassing the default privacy settings of Apple’s Safari browser — and, as Microsoft has now asserted, Internet Explorer — Google has decided for all of us that our Web activity will be more closely tracked. They opted us in, without asking. And without a way for us to opt out. (We didn’t even know about it until the Wall Street Journal blew the lid off this last Thursday.)
On the merits, this is a pretty big deal. A class action has already been filed, and an FTC probe is almost certain. That the no-tracking settings were circumvented (and secretly) makes it easier to infer that even Google worried it might be touching a third rail. It says it wasn’t, that its intent was only to discern whether Google users were logged into Google services and that the enabling of advertising cookies was inadvertent.
But the atmospherics are horrible:
- Google is the company whose unofficial motto is “Don’t be Evil.”
- Google and Apple already have a pretty tortured relationship. Secretly deploying an exploit for an Apple product isn’t exactly a good-faith gesture.
- Google only a month ago got some props for putting the best face possible on a big change in its privacy rules under which it now aggregates information gathered about you from one Google service with that collected from all the others you might use.
That last point in particular frames the bigger problem: We, the general Internet-using public, have an innately uneasy relationship with the “free” services we use. We vaguely understand that we are being spied upon — how else could Amazon and Netflix make such darn good suggestions? — and more or less see it as a reasonable trade-off. Then we try not to think about all the consequences of this new world order.
@ tangogo68 Actually, the TV analogy doesn’t really work well — even if you are a Nielsen family. It’s one thing to be part of an audience, especially when the audience is a extrapolation of a small subset of homes which are self-reporting. It’s another to have your every move monitored and logged. Google and Facebook (et al) don’t just need members — ie, an audience. They need that audience to share, not just show up. To me, that is a huge difference and a business model unique to these times.
Tech wrap: Google bypassed Safari privacy settings
Google landed in hot water over revelations that the search giant and ad companies had bypassed the privacy settings of millions of people using Apple’s Safari Web browser, using special computer code that tracked their movements online. Stanford researcher Jonathan Mayer discovered the code. Subsequently, a technical adviser to the Wall Street Journal found that ads on 22 of the top 100 websites installed the Google tracking code on a test computer, and ads on 23 sites installed it on an iPhone browser. Google disabled the code after being contacted by the Journal, the newspaper said, and Google issued a statement, saying: “The Journal mischaracterizes what happened and why. We used known Safari functionality to provide features that signed-in Google users had enabled. It’s important to stress that these advertising cookies do not collect personal information.”
Apple’s share of China’s booming smartphone market slipped for a second straight quarter in October-December, as it lost ground to cheaper local brands and as some shoppers held off until after the iPhone 4S launch last month. While Apple regained its top spot as the world’s largest smartphone vendor in the fourth quarter and for last year as a whole, it slipped to 5th place in China. In the last quarter, Samsung knocked Nokia off the top slot, taking 24.3 percent of the market, more than three times Apple’s share, data from research firm Gartner showed.
A British student, who hacked into Facebook’s internal network risking “disastrous” consequences for the website, was jailed for eight months in what prosecutors described as the most serious case of its kind they had seen. Glenn Mangham, 26, a software development student, admitted infiltrating Facebook from his bedroom at his parents’ house in York in northern England last year, sparking fears at the company that it was dealing with major industrial espionage.
Foxconn, the top maker of Apple’s iPhones and iPads whose factories are under scrutiny over labor practices, has raised wages of its Chinese workers by 16-25 percent from this month, the third rise since 2010. In a statement, Taiwan-based Foxconn said the pay of a junior level worker in Shenzhen, southern China, had risen to 1,800 yuan ($290) per month and could be further raised above 2,200 yuan if the worker passed a technical examination.
OpenX opens kimono to reveal financials – prepwork for an IPO?
It’s the season for getting a peek at private Internet companies’ financial results.
Wall Street is still chewing over Facebook’s recently revealed numbers, and on Monday, OpenX Technologies, a private, venture-backed online ad company, served up some financial gristle of its own.
The company, which provides an online ad exchange as well as ad server technology, said that it is now on track to generate more than $100 million in revenue on an annualized run rate basis and that it became profitable in the fourth quarter of 2011.
And it said it expects to profitable in 2012.
The move comes a few weeks after Facebook, the world’s No.1 Internet social network, pulled the curtain back on its financials for the first time, revealing $3.7 billion in 2011 revenue, with the release of the prospectus for its upcoming IPO.
OpenX CEO Tim Cadogan said the release of some of its financial results was not a sign that it planned to follow Facebook’s footsteps into the public market — at least not immediately.
“It’s premature to commit to it at this point, but it’s definitely something we’ve been thinking about,” he said of an IPO.
from Paul Smalera:
The piracy of online privacy
Online privacy doesn’t exist. It was lost years ago. And not only was it taken, we’ve all already gotten used to it. Loss of privacy is a fundamental tradeoff at the very core of social networking. Our privacy has been taken in service of the social tools we so crave and suddenly cannot live without. If not for the piracy of privacy, Facebook wouldn’t exist. Nor would Twitter. Nor even would Gmail, Foursquare, Groupon, Zynga, etc.
And yet people keep fretting about losing what’s already gone. This week, like most others of the past decade, has brought fresh new outrages for privacy advocates. Google, which a few weeks ago changed its privacy policy to allow the company to share your personal data across as many as 60 of its products, was again castigated this week for the changes. Except this time, the shouts came in the form of a lawsuit. The Electronic Privacy Information Center sued the FTC to compel it to block Google’s changes, saying they violated a privacy agreement Google signed less than a year ago.
Elsewhere, social photography app Path was caught storing users’ entire iPhone address books on their servers and have issued a red-faced apology. (The lesser-known app Hipster committed the same sin and also offered a mea culpa.) And Facebook’s IPO has brought fresh concerns that Mark Zuckerberg will find creative new ways to leverage user data into ever more desirable revenue-generating products.
This is the way we’re private now. It’s ludicrous for anyone who loves the Internet to expect otherwise. How else are these services supposed to exist -- let alone make any money? Theft or misuse of private user data is a crime, certainly. But no social web app -- not one -- can work without intense analytics performed on the huge data sets that users provide to them voluntarily (you did read the terms of service agreement...right?).
And the issue compounds when people connect one site to another. By linking their Twitter to their Facebook to their Google+ to their Foursquare to their Zynga to their Instagram to their iOS, users are consolidating their lives, and in the process making them more attractive to marketers. While Facebook, Twitter and other services have made attempts to warn users about hitting the “connect” button, many of us hit that button with reckless abandon, without a thought of who’s slavering on the other side.
The reason social media and digital information companies want that data is because of what we refuse to give them: money. No one wants to pay for the privilege of chatting with their friends or using a coupon, and to this day, no one has to: Go ahead, ring their doorbell or pick up the free coupon book from your front stoop. But if you want to chat using Facebook or Gmail, or you want to buy a groupon for an 80 percent-off Botox service, you will have to tell those companies who you are. And those companies will use that information to tailor their offerings to you, increasing your value as a user and a customer. They will slice their data sets into a million different pieces and show those pieces to people -- advertisers -- who will pay them money for the privilege of using their service. They’ll use it to get to you.
This is an update on an old media model. Magazines and newspapers for decades could only guess at the readership of their product and the demographic of their customers. But now social and new media demand to -- and can -- know exactly who you are before they agree to let you use their free services. Even email newsletter services like the increasingly hot Thrillist -- which might innocuously start you on their service by asking only for your simple email address -- deploy click trackers, pixel trackers and other online data-gathering techniques to start to put together a picture of you as a user, both individually and in aggregate. A deceased magazine like Spy could only dream of that kind of intel.
It is utter rubbish to claim that we cannot have a better internet than the one we have right now. Most users simply do not really understand what and how much they have given up. And what has been given up unknowingly can be reclaimed. That is what laws are for.
Europe has a much better system, and much more privacy. And we can improve on that, without wrecking the essentials of the internet.
Trolling for a tech showdown
The scene: A federal courtroom in Tyler, Texas.
The drama: A lawsuit by a patent troll who said he owned the rights to the “interactive web.” The troll says he’s owed some back rent for owning the Web we all use every day.
Dramatis persona: Tim Berners-Lee. Perhaps you’ve heard of him. He invented the World Wide Web.
Oh, to have been in Tyler. It was the stage for a showdown in one of the most bizarre patent troll cases ever, pitting (metaphorically if not in fact) expert witness Berners-Lee against some punk who wanted to make his name by taking out a very, very big gun in a shootout. The plaintiff, Eolas, claimed it owned patents that entitled it to royalties from anyone whose website used “interactive” features, like pictures that the visitor can manipulate, or streaming video. The claim, by Eolas’s owner, Chicago biologist Michael Doyle, was that his was the first computer program enabling an “interactive web.”
If Texas was still the Wild West this might have been settled at High Noon at some dusty, just O.K. Corral, with single-action Colt .45 revolvers. There was no gunplay, but for geekdom the calm morning testimony in an air-conditioned courtroom was just as exciting.
On Wednesday, Jennifer Doan, a Texarkana lawyer representing defendants Yahoo and Amazon, examined Berners-Lee for the plaintiffs, which include Google, Amazon and Yahoo. An excerpt from Wired‘s report:
When Berners-Lee invented the web, did he apply for a patent on it, Doan asked.
“No,” said Berners-Lee.
“Why not?” asked Doan.
“The internet was already around. I was taking hypertext, and it was around a long time too. I was taking stuff we knew how to do…. All I was doing was putting together bits that had been around for years in a particular combination to meet the needs that I have.”
Doan: “And who owns the web?”
Berners-Lee: “We do.”
Doan: “The web we all own, is it ‘interactive’?”
“It is pretty interactive, yeah,” said Berners-Lee, smiling.
@danbri Quite right! That last reference was a bad boo boo.
How ‘don’t be evil’ became ‘let’s all be evil’
It’s been nearly a decade since the tagline “don’t be evil” was attached to Google in a Wired magazine profile. Google, a little more than four years old, adopted the phrase as a code of conduct as it navigated through a growing list of hard questions, and as it increasingly shaped the Web itself. Since then, the term has been hurled back at its founders again and again — every time a saucy blogger or disgruntled user had a bone to pick with the company.
Google’s executives have long since stopped saying “don’t be evil” in public, and the company has been more willing to make bold moves that court controversy (as long as they lead to changes that will promote further growth). Case in point: Last month, Google altered its search results to favor pages from its Google+ social service over other social sites.
Facebook responded by designing a browser extension called “don’t be evil” that played up results from non-Google+ social sites, like Facebook and Twitter. It was an amusing potshot at Google — but for the wrong reasons. Facebook’s track record at focusing on its users’ needs and preferences is even worse than Google’s. Beyond the privacy snafus that flare up regularly, Facebook has designed its site not to make it easier for us to share content with our friends, but to weave corporate brands and ad campaigns into those friendships.
But Facebook’s exercise in highhanded hypocrisy was revealing for another reason. At some point, tech companies bled “don’t be evil” dry of any true meaning. It’s a dead motto, and its sole remaining function is as a ruler to slap the Google brand. In 2012, evil must be a part of your stock and trade. How else will you make billions in profits in the Web industry? Google and Facebook can snipe at each other all they want. But they both follow the same credo now: Let’s all be evil.
But what exactly do we mean by evil? The word can be traced back to the Bronze Age as a disparagement, but evil as we talk about it today can mean anything from an annoyance to extreme moral wickedness. And most of the evil things tech companies do don’t quite rise to the level of evil — it’s just bad. Tweaking your search results to promote your social networks is bad. So is confusing your members when they try to protect their privacy. You take a step toward moral wickedness when you let countries decide how they want to censor tweets. And you’re pretty much on your way there when you poison your workers with neurotoxins in the name of manufacturing efficiency.
In the still-nascent world of social networks, though, things could be worse. The problem is we’re already on our way down. The most powerful companies are designing their sites not to improve the user experience, but to try and get the better of each other.
Facebook and Twitter have declined to let Google incorporate their data feeds into its search engine (those companies say the data is available on the Web; Google says their terms of service don’t allow this). So Google responds by favoring Google+ in its search engine, and downplaying Facebook and Twitter. Very well, point made. But how does this help the rest of us?
What does evil mean? How about the fraud at the heart of Google being a pay to play engine rather than a search engine? The fraud of representing your “search algorithm’s” “technology” being something other than a fraud. Google’s algorithm was always a front for the fraud. I’d call that evil.
@WeWereWallSt: Correct! And fixed.