Sign o’ the times

There are events and then there are not-so-ordinary events that give us hints, even in their disassociation, about the direction that technological (or any other type, for that matter) developments will head.

In the past week we have seen three such events – Microsoft’s formal overture towards Yahoo!, Facebook’s less-than-stellar numbers and Twitter’s ongoing saga in trying to keep a web-scale messaging framework up and running – that give us tasty hints as to where we may be headed.

The simpler, shorter version of the Microsoft – Yahoo! story is that companies that do business in the old school way – a manner similar to a behemoth, clumsy and ugly in gait – are history on the internet. Lock-in of the user and his/her data to platforms or products is a strategy that is history. It is only a stellar product that will keep companies alive in the future. And neither Microsoft, nor Yahoo! have built and in-house hit web-scale product in recent times.

The feeling that keeps coming back to my mind is that Microsoft and Yahoo! will be one of those weddings that look perfect as a mental image (for the shareholders and business wonks), but in practice it ends up being an absolute nightmare. There is a staggering amount of redundancy (for every Yahoo! product you can think of, there is almost a competing one with MSN/Live.com) and the integration will also be rotten in terms of platforms and cultures.

Even if you set apart the strong stench of desperation in the move, the fact remains that these are two companies that are struggling to catch the imagination of the younger and upcoming generation. By the time the dust settles on this one, much confusion would have ensued, which would tick off the loyal users who make up a vast majority of the numbers that make the deal look exciting.

That said, it is indeed a sad development to see an internet icon like Yahoo! being in the position that it finds itself in now. And in that state of distress lies a story for everyone who makes a living off the internet – don’t take anything for granted. Earlier, a company’s lifecycle – from inception to success to the demise – used to take decades, now the same is being compressed into ten years.

It is a theme that I will never tire of telling everyone I know: being nimble is a priceless asset in doing business now – nurture it, grow it and covet it with as much care as you covet your bottom line.

Windows 7 and future predictions

Ars Technica has a nice piece that separates the wheat from the chaff on Windows 7, which is the successor to Windows Vista. As much as I dislike Microsoft’s Windows Vista, Windows 7 is a product I am deeply interested in since the man who is heading the effort is Steven Sinofsky, who was responsible for bringing out the revolutionary changes that was seen in Microsoft Office 2007.

Another reason why Windows 7 would be an interesting one to watch is because it will be the first major operating system release that will have the full weight of the new architect in town — Ray Ozzie — bearing down on it. Both Sinofsky and Ozzie represent a change in style and direction for the company, but what is more interesting is that the expected street date for Windows 7 — either late 2009 or 2010 — would represent a technological landscape that would be drastically different from what we see today.

Some of the points to ponder:

Google: The company has eaten Microsoft’s breakfast, lunch, dinner and the entire banquet. They are also making minor inroads into areas that Microsoft defends with all its might like the enterprise. Admittedly, a couple of thousand tiny firms defecting over to Google Apps is not even enough to make even the tiniest scratch on Microsoft’s bottom line, but what it does for sure is to create yet another distraction for the company when it could really do with none.

But to take these distractions as low-impact would be amazingly silly. Not every firm is born as a member of the Fortune 500 club. Some of them grow over years to become behemoths, others end up being medium size ones, while the rest stay on where they are. All of them represent sales of differing volumes and as Microsoft already knows, it is hard to get the enterprise segment to switch once they have made a choice. Most of these also upgrade their degree of involvement with Microsoft through time, adding more license seats and upgrades. In short, Microsoft is fibbing when they tell you that such players who move over to Google don’t worry them.

That said, Microsoft too is working on the “cloud” in terms of storage and processing to add that facet to their enterprise suite. But it is a hard one to pull off when you are playing both sides, saying Google’s strategy of being cloud-bound is flawed and also trying to up sell their own cloudiness at the same time.

Mobility: I will refrain here from writing on Google’s Android since it really has to be seen how it will play out eventually. Meddling in consumer-owned hardware is not Google’s strength and even if the platform is good, it will have to contend with operators and other variables (like Google’s bid for spectrum) in making it a success. Microsoft here has limited success, but the stars of the show here are Nokia (Symbian, Mameo) and Research in Motion (Blackberry). Between those two, the entire spectrum of individual users and enterprise has been covered, leaving Redmond not much wriggle space.

The possibility of disruption here is incredibly huge because it unbundles the data and processing from the desktop, which is what keeps the kitchen going at Microsoft, and puts it in an environment that is not dominated by Microsoft. Even at this stage, someone like me who used to open up the laptop every night at home, no longer does that because of my Blackberry that helps me access practically every service I need either directly or through Opera Mini. Two years down the line all of these services would be better by at least twofold.

Decreasing cost of technology: With the overwhelming influence of opensource, outsourcing and the commoditization of technology it has become easier and cheaper to start up almost anything these days. Almost every successful recent web venture has taken advantage of this and we have new players like Amazon (combination of S3, EC2 and SimpleDB) who now allow you to focus more on creating products than understanding how the individual parts work. In two years time, it would not be hard to imagine browser-based desktops and computing environments that function pretty close to how a regular desktop environment would function.

What this would mean eventually is that the base level of quality for newer products would increase with time, while the cost to create them would decrease dramatically. Compared to that, Microsoft would be spending more to release every new product and operating system and fighting more products that would be increasingly cheaper to build and better to use.

The next generation: My generation, the one that came before mine and the one that is to follow won’t be the same as the coming ones. We were not born in a world where computing surrounds us in various forms. Most of us who design the digital experience, do not natively think in such a world. While it would be wrong to think that people who think natively in those terms would be a vast majority by the time Windows 7 is pushed out of the door, a fair number of them would have the OS as a gateway to their digital experience and not designing the OS to meet their expectations would in all likelihood alienate them, while designing the OS with them in mind would alienate the current crop of users. It is a space that is not much fun to be in.

To conclude, it would be totally over-the-top to assume that by the time Windows 7 comes up the world would have walked away from Microsoft. They will be challenged very hard over many aspects of their business and there will be considerable erosion in their customer base. But to take even 2010 as a benchmark year would be foolish to see the impact new technologies would have on Microsoft. The enterprise is a slow moving creature and takes time to change and even Google can’t do much to change that.

Windows Vista: A Tale of fear and loathing from Redmond

I had my first major run in with Vista on Sunday after agreeing to fix Nikhil’s new laptop with a XP install. Since XP did not have the required SATA drivers, it would not recognize the hard disk drive and allow me to wipe it clean and ‘upgrade‘ the laptop to Vista. That left me poking around to see how the beast was and it is a user experience par compare in terms of being an absolute disaster.

First thing that gets your notice are the number of alert boxes that pop up for almost everything you do. I do “sudo” on OSX for everything that requires admin level access and I am also used to authenticating key actions, but Vista goes out of its way to make the experience almost entirely painful.

Secondly, they have worked REALLY hard to add another level of abstraction to existing screens and menus. For instance, the Control Panel, when you dig deeper, has pretty much the same layout and items on it as XP, but on top it is a totally different beast.

As a ground rule, what I’ve seen is that almost everything is harder by differing magnitudes on the entire operating system. If I had my own way, I would gladly pop the latest Ubuntu CD, wipe out Vista and forget all about it.

Microsoft may have made Vista one of the most stable OSes it has ever released, but what good is a stable OS if it is a royal pain to use in the first place? And I’ve not even gotten into the 14 different versions it has and the perpetual question: “will it do full Aero?” In any case, the eye candy is not even fun to use and serves very little purpose with the constantly throbbing and pulsating buttons.

I can only say that I’ve never been happier about switching.

Online Networking: Opportunities and challenges

Why is everyone in the online space running crazed rolling out one social networking product after another these days?

Has technology suddenly found out the real altruistic reason for its existence — to bring all of humanity under a single digital umbrella that will allow everyone to easily communicate and identify with each other? Cheap potshots and the silly sarcasm apart, the reason why everyone is falling over each other is quite simple: the industry has gotten a whiff of its ultimate elixir in online networking: the end of the perpetual quest for ‘sticky’ content and users.

So, how exactly does online networking differ from other regular content properties? Let us take a look at a couple of the distinguishing factors:

Discovery: Unlike regular online content, online networking helps you find much more than a piece of text to read or pictures to ogle at. It helps you find new people with similar interests, new things to do with people who share the similar interests and also find new communities that will help you enrich yourself alongside people who share similar likes and themes. The Facebook News Feed is one of the best examples of this, even though it had a very controversial debut on its network. Till then, in other popular networks, you had to manually go and track each community joined by a contact and any other action performed by him/her. It is now next to impossible to evade the river of context that flows all around you because of the News Feed.

Context: The above-mentioned discovery element is encapsulated by containers of context that help you find them. You can find them through music you may like, through photos you like clicking and other numerous common themes. Even in the PhD paradise called Google, there are limits to context that is determined by the algorithm. For instance, even Google News can classify the data only into a handful of categories and most personalized and suggested content on the internet (like Findory) are still not up to scratch when it comes to discovering related content at the individual’s level. Even with an extremely good element of artificial intelligence in your system, you still can’t beat the quality of linked and contextual linkages that is generated with actual intent by human beings.

In an online networking scenario, every single connection is led by context. I am connected to (or I identify with) another person on my network in a variety of ways: geography, interest, work place or something else. That kind of sanitized, structured and relational data beats the pants off what any algorithm can do. Instead of being led by the algorithm and its vagaries, the connections can now be refined by it. If data in massive networks like Facebook can be mined, you can predict, with good enough probability, things that I or you would be interested in and the people you or I are likely to hook up with. None of this is possible on a regular news website or on a discussion forum, where you just consume the data and go home. There is hardly any way to connect or engage another person who has a lot of similarities with you. Hell, you can’t even know if there is another person with similar traits who has read the article at the same time or any other time.

Sticky != icky: To build any good and successful online property, you need a healthy mix of repeat visits and new visitors. Organic growth in traffic and usage is the lifeline of any online property and a steady percentage of it in your total traffic is always a sign of a property in good health. If this recipe is seasoned with more than 50% of return visits and a good page view per user number, the chances are that you would have by now on your hands a very successful website that has oodles of sticky content. What this essentially enables you to do is to grow on both counts: in terms of existing usage and in terms of new usage, with and new users steadily being converted to regular users.

The trouble is that this is a hard one to pull off with generic content sites, which tend to have a high number of regular visits, a low percentage of new visitors (the one hit wonders and the even-driven flash mobs) and low-ish page view per user number. Every time you check your Facebook inbox or your Orkut scrapbook what it does is to add another page view to the website’s page views and chances are that most online networking users are more likely to refresh their profile and message pages a lot more, compared to their actual email inboxes or a news website. And this lust for the page view love fest is from which the many new online networking love children are born.

The opportunity for new players

Uniquely addressable users: Unique users are like legendary golden geese in the online trade. And well-established networking communities are like mosquito larvae infested catchments of standing water filled with these users: they buzz with feverish activity and multiply in every possible manner and more rapidly than what you could ever imagine. Moreover, to make your profile work in such scenarios, you need to provide information that is every advertiser’s endless wet dream. You are voluntarily providing the kind of information to help profile yourself that collected otherwise would result in the companies doing that being dragged to court.

For example, if you check my profile you can see that I am currently part of the India network, that my location is uniquely identified as New Delhi, that I am single and you can also figure out my tastes in music, books, movies and political views. This is all structured and uniquely addressable data, broken down to the most granular of levels. If you don’t believe me, take a look at what Fox Interactive Media (FIM) has been up to recently. In an interview with Silicon Alley Insider, Mike Barrett, Chief Revenue Office of FIM, says they have figured out improved delivery methodologies for targeting based on such data and are looking to price these ads at a 20-30% premium, compared to regular banner ads. That is the kind of number any business person with half a business brain would find hard to say ‘no’ to.

The Indian online Godots: Yes, we revisit the pet target audience of every new product launch these days, the part of the billion who are not yet online, who probably won’t even know what online is at this stage of the game. We are constantly waiting for them to come and make us all rich. If you ignore such niggles that tend to rudely invade our digital fantasies, there is a fair bit of merit in the argument/expectation. We are diverse in ways you can’t even start to imagine. You can address the whole of India in terms of a nation, regions, language, caste, religion: the list is endless. Ergo, the opportunities to slice and dice the market are also endless. That is, once it manifests. So a lot of this is a punt on the future. Who knows whether it will pay off or not.

The social operating system: When Facebook launched F8, their platform to let third party applications interact with their users, it changed the rules of the game in such a way that every other online networking website is now falling over each other to release a similar product. Other than the nice positive for Facebook of shoveling off the burden of building a stream of new features to gullible souls who now do it for them for free, it has also now established a virtual operating system within the Facebook context that is now a decent launch pad for new sites and products. Once networks like Facebook become the start page/OS of the future it is going to be a hard ask to launch a new product without spending insane amounts of money (example: the bigadda.com creatives).

The Risks for the new players

Targeted advertising on such profiled networks are still not up to scratch and the technology is still being developed. Current delivery technology is based on either IP geo-location or tracking cookies, neither of which are right now in a condition to exploit an extremely finely defined profile like a 27-year-old girl who likes Harry Potter, lives in India, with a soft spot for Archie comics. The point is made more elaborately in the Mike Barrett interview and is surely a cause for concern, but I am also sure it is something that will be fixed over time. But till it gets fixed, advertisements on these networks tend to end up being seen as irritants and not a patch on the contextual advertisements that Google has spoilt everyone with.

Low Yield: On a related point, while online networking websites account for huge page views, the CPMs, click throughs and conversions are abysmal on the inventory. When you have pages and pages of content resembling lolcat lingo on some of the more popular networks, it is not surprising that even Google’s engines put up their hands and admit defeat. I can’t remember or find the story, but someone (from Google?) had once commented that a lot of impressions on Myspace was junk and did not amount to much. So it is kind of obvious that traditional methods of advertising are not going to work too well in this segment and the way Facebook is going about it, by inserting them in the News Feed, is bound to help them accumulate bad karma at a rapid rate from the users. In short, the page views are there, but a fair percentage of it is not really worth much.

Switching costs/exit barriers: The value of any network is directly proportional to the connections you have on it. Existing users have a lot invested in terms of their connections, ratings, groups etc in the older networks. Half the grunt work in switching to a new network is to find the old contacts once again. The problem is addressed to a minor extent by the email account-based importers, but that in itself creates more problems because it requires a one-to-one mapping between your profile email address and the profile email addresses of your friends. It is a problem that can only be solved by true interoperability and that is a pipe dream of the most unrealistic kind.

Identity: Bill Gates on Myspace need not necessarily be the same Bill Gates on Orkut. For that matter, neither the Myspace Bill Gates nor the Orkut Bill Gates are likely to be the famous Bill Gates from Microsoft. At some point, our core digital identities will be consolidated into a single space, much like how Openid works, but none of the networks support Openid as of now and as a result, since identities are not portable, it will eventually create yet another high exit barrier for the users.

On a final note, there would arise the obvious question as to why do crazy deals like Google gulping up Myspace’s inventory and Microsoft signing a deal with Facebook on similar lines happen? A lot of that has to do with volumes and the rest of it with presence and Google did goof up terribly with not buying out Myspace when they could have earlier for a tiny sum compared to what they are paying FIM now. Even with the junk page views, the volumes these networks pump in terms of sheer page views are enormous and if you are in the advertising space you’d want a bite of that, even if that bite feels a bit empty once it hits the stomach.

This is a space where everyone — content creators, sales people, advertisers, content distributors — can feel where the action is going to be. But how it will unravel is something that will be only revealed with time.

Technorati tags: bigadda, social networking, social media, online advertising

To build or to buy, that’s the question

One of the toughest decisions any company has to revisit time and again is whether it should build a product internally or if it should buy out/from a vendor who has already done the same thing. In simple, practical terms, the choice is between buying a pre-built wheel and building one from scratch all by yourself.

The greatest example of a botched opportunity on the same lines is the story of Yahoo! and Google. Long time ago, Yahoo! had actually funded the growth of a little-known company called Google — a decision that they must regret every day now. They could, probably, have bought out the company then (and could have done a huge favour to Microsoft by doing that and effectively killing it) and never looked back. They did not, and are now struggling to catch up with them in both search and advertising, which are Google’s core competencies.

It is very easy to kick Yahoo!’s ass for not having bought Google, but the fact of the matter is that it is a very tough decision to make when you are dealing with wheels. There is not much else than instinct to guide you in making that decision and sometimes it works out well, other times it just does not. But in general, it is not the best of ideas to be dependent on an external vendor on whom your business’s core value proposition has a critical dependency.

There are workarounds to the problem, like investing in the long term in developing the technical expertise in-house and contractual clauses that protect you against sometimes unavoidable circumstances, but there is no real proven method to pull this off each and every time. That, of course, is the reason why there are only a limited and small number of smart people in the world who can get it right. You just have to make sure that you are either one of them or, for lesser mortals like us, you work for one of them.

Technorati tags: yahoo, google, software development, mergers