Category Archives: Business & Technology

What’s that $19B about? WhatsApp at a glance.

Doc Searls provides an excellent summary of the implications for trends in marketing and consumer privacy related to FaceBook’s $19B acquisition of WhatsApp. Here’s my take on the deal terms:

We have to assume there is a lot of overlap between the FB and WhatsApp user base. And, regardless of what anecdotal information we have about how people pay for or use the service, the potential revenue from the WA user population remains purely speculative. So, what do we actually know?

FB values WA users based on their activity, which represents about one message per day per user at the highest level. They are slightly more engaged than FB users, with 70% daily usage rate vs. FB’s 63% of users active every day. They are paying $1 per message sent per user/day, or roughly $0.00273 per message sent over a year. That’s a manageable low cost of traffic acquisition, but because the payment is concentrated in time, the financial impact on FB’s business could be pronounced, though we must acknowledge there is downside risk to the deal, too.

CNN Money reports that FB sees revenue of approximately $1.72 per user globally. It’s much higher in the US and Canada, where revenue is about $4.85 per user/year. This means the combined company could make up to $0.72 per user in the first year, if they implement ads in WA. However, it is important to note that FB’s ARPU for the Rest of the World and Asia are sub-$1. If most WA users are in Asia and developing countries, which I’ve understood is the case, the deal loses money more often than not under current conditions.

I doubt people will pay for the WA service (it’s unproven now) and, if they were to pay $1 a year, the deal is only a break-even for those users who pay. If 10% pay, which is a typical “Freemium” conversion rate used in projection, there is not sufficient revenue to prevent WA from being mined as a source of user data and implied intentions. As WA is integrated into FB, notably to FB’s user surveillance regime, which is the core of the FB business, it will likely need to add ad or VRM revenue to make the deal worthwhile. And that puts the whole deal in jeopardy, since there is little to no switching cost for users.

My $0.02.

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Productive meetings vs. the cluster-call: New collaboration thoughts

A couple weeks ago, I asked via LinkedIn and Twitter, what makes a meeting productive. The question has led me to conclude that a new type of collaborative activity, the cluster-call, is an opportunity for greater productivity, but also can be a barrier to innovation because it is not managed differently than a meeting.

For several years, a new kind of collaboration activity has been developing on the foundation of telecommunications, the cluster-call, a continuous use of partial attention via conference call. These are virtual gatherings, typically scheduled so that all the participants can be available if — and that’s the key condition — if something comes up for which they have responsibility. Cluster-calls typically involve 30 to 60 people, all of whom are splitting their attention between the call, listening of hot button issues, and some form of work or diversion. One hears of these calls as “a meeting that is getting a lot of momentum.” I often suspect that these calls are the source of the hours of social media use, or Solitaire play, that managers fear to count on their activity reports. Cluster-calls are, however, a viable form of collaboration at the right scale.

Cluster-calls work when they are not substitutes for meetings with an agenda that requires a decision. They are excellent collaboration environments in the right size and with the right scope. Teams, rather than cross-team collaboration, are best served by the constant connectivity of a cluster-call. As people continue to work, they can tap anyone in their team, or reach out individually to bring someone from another team onto the call, to address questions, discover information and brainstorm. But try to turn a cluster-call into a daily meeting, treating it like a scrum or stand-up meeting, where people use the immediacy of the agenda to get work done, and the call will degenerate into a protracted distraction from productive work.

So, how do you have a productive meeting? Or a productive cluster-call? A meeting, whether physical or virtual, is defined by its goals. A cluster-call is a setting for outcomes, but without an agenda, it becomes primarily a regulator of change. On large cluster-calls, people tend to focus on what can stop or interrupt normal business activity. They flag concerns without being obligated to provide solutions, so these kinds of gatherings are hotbeds of change prevention.

“[It] depends on the sort of meeting, but generally, when clear goals have been defined & everyone knows what they’re supposed to do,” replied Phillip Mueller, a German entrepreneur living in The Netherlands. This describes a productive use of time, it could apply to any kind of gathering.

Robert Reddick, a Charlotte, N.C. entrepreneur, offers that a productive meeting is “a place to pre-flight and execute decisions,” also a result that could come from a meeting or a cluster-call. But without an agenda, the framework for decision-making is typically absent.

A cluster-call, which is simply a way of describing being simultaneously connected to a virtual space, works great for small groups who are dealing with a lot of uncertainty. In this age of demanding competition, where people come and go from small projects, cluster-calls let people learn quickly in small groups. A scrum meeting, for instance, can be extremely productive, because people share information as the need for sharing becomes apparent. People talk about things and when someone on the call doesn’t know about the project or subject of conversation, they can ask. Often the instructions come offline, away from the cluster-call, but the group determines when that is necessary.

Small groups constantly connected can thrive. Bring 30 or 60 people together, a common practice these days in larger companies, and the productivity becomes the explorations of limits. The limits of the group’s knowledge, the limit of the group’s tolerance for new ideas, for change and the limits of the organization’s flexibility become apparent. The outcome is that everyone is quiet unless they see the need to raise a flag. It’s easier to play along and be quiet in these large meetings.

There is a breed of participation in cluster-calls: Grand-standing. It becomes a regular occurrence that a small, consistent group dominates the calls, exercising their expertise without actually intending to share that expertise. Knowledge is a crowded cluster-call is like the knowledge that drives crowds: The noisiest people keep things moving in one direction.

Meetings should be recognized as events with agendas. If the agenda isn’t addressed, that is not a productive meeting. On the other hand, a small cluster-call can work effectively  without an agenda, though it must not become routine or it will descend into unproductive activity. A regularly scheduled call of 40 to 60 people (I’ve been on these calls with up to 90 participants on several occasions), even with an agenda, becomes an exercise that reinforces the flow of information, downward due to the likelihood that any newcomer, any controversial idea will be squelched by the people most likely to grandstand.

Leadership based on the intimidating presence of a crowd that will agree quietly destroys the organization. Which is why the road from democracy to tyranny is always paved by populists, as well.

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Privacy, the NSA, and cranky customers

There’s a discussion the VRM project mailing list (home page here), hosted by Doc Searls and Harvard University that suggests that the erosion of personal privacy may have been planned by our government or, at least, the National Security Agency. Of course it was planned. Here’s my response to the list:

Agreed, the fingerprint reader doesn’t require nightmare scenarios involving severed fingers to justify outrage. The simple fact is that a thief could walk up to you on the street and point a gun at you, demanding that you unlock your phone. That’s a variation on the kidnapping-for-ATM-access scheme that is used in some U.S. cities and many cities in the developing world as the most convenient way to kidnap someone. The fingerprint reader simply makes that easier to do. It’s not a new threat to privacy as much as evidence of the continuing consolidation of the destruction of privacy we’ve allowed to happen.

Point of information, since I broke the original Clipper Chip story (learn more) for MacWEEK (a day before the Times): The NSA had several concurrent efforts to intrude on public crypto standards in the early 90s. They had established an advisory role with NIST (National Institute of Standards and Technology) in the late 80s with the plan of driving backdoors into all potential public crypto standards. It wasn’t a fallback strategy after Clipper was outed for its NSA backdoor, but part of a campaign on many fronts that was largely ignored by public policy people and despite complaints from privacy advocates, who do not all wear tin hats.

At the same time as Clipper, NSA was imposing its advice on NIST for the MD-5 message-digest hash algorithm that is used to generate 128-bit keys, which opened the door to what we are living with today. The NYT’s John Markoff and I both reported that, too, though our publications’ archives don’t seem to be accessible for free access. National cryptography policy has resided in the armed forces for far too long, to the point where it is negatively impacting U.S. technical competitiveness. This does not happen by accident; it was planned and abetted by both political parties.

I think it is well past time to refer to privacy advocates as shouting cranks. It trivializes legitimate citizen concern and, because of the intrusion into public communication, marginalizes consumer complaints. Customers have been waving companies like Apple and Microsoft off supporting Fort Meade for years. But these companies, both of which resisted NSA suggestions that they compromise their security in the 1990s, have continually heard their privacy-concerned customers described as cranks and edge-cases. We eroded our own privacy and sacrificed the economic power in personal information willingly.

We got here by not being activist enough, not by being too crazy to make the case that our security in the knowledge that we speak in private in our homes and papers is a 21st Century human necessity, and certainly a U.S. necessity.

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Amazon Cloud Drive: Migration Reality

Amazon Cloud Drive: Learn More. Click the link and consult the pricing table at the bottom of the page. Go ahead, I will wait. All future media purchased from Amazon will be stored free on the service, but it is the migration costs I’m looking at here.

Cloud Drive is “free” — that is you can store 5 GB of music, about 1,000 songs or 20 minutes worth of HD video before paying for additional storage. I looked up what it would cost to store my 1.6TB iTunes library: $1,600 a year.

My Zune library files, both the music I’ve purchased and the albums I listen to, are stored and accessible as part of the music subscription service.

If I were to embrace Cloud Drive as my media storage service, I’d be adding about $1,900 a year to my media costs in order to migrate my current collection to the Amazon service.

The everywhere-access of cloud storage is a great user experience, but not if you have to count storage costs by increments of hundreds of dollars a year. Amazon needs to assess the value of a heavy media buyer over their lifetime and recognize that zero-cost migration is the price they will pay to get a shot at a new customer in in this environment.

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I think we got the cloud right

TechNet recently published a series of videos and an article on the comprehensive cloud offerings from Microsoft. I think we got the story right, and that the story is a good one.

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Business Plan, Meet Reality

[caption id="attachment_1976" align="alignright" width="300" caption="With apologies to Hugh MacLeod if he's done the same idea"]With apologies to Hugh MacLeod if he's done the same idea[/caption]
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Let’s talk about the economics of great journalism

Responding to various recent postings about journalism, including Ethan Zuckerman, Seth Godin, Dan Gillmor, Amy Gahran and Lisa Williams. I think the economics of journalism and ethics are deeply related and we tend to talk about them separately, emphasizing the dying channels for distribution at the expense of understanding the net loss of reporting.

When I worked with the team that built the ON24 iFinancial Network, a personalized financial news network that delivered hundreds of long- and short-form investment news each day, we tried to grow on advertising. Even though we had several million viewers who spent an hour or more a day getting much deeper reports than other sources provided—complete coverage of conference calls, analyst reports, company statements and executive speeches—advertisers were slow to adopt the idea.

ON24′s news team operated on approximately $1.8 million a year at its peak, when it was producing 28 hours, and more, of programming a day, far below the cost at competitors like CNBC, which paid just one of their anchors almost as much as ON24′s news staff of 85 full-time employees. Such radical changes in the economics of news are always possible, especially now.

Media innovation cannot be dependent on advertisers, they will not take the risk. Innovation must find a foothold with people who demand that great news be available. The users of news have to support it to get it going. In the past, rich men made this investment and we got what they paid for. Are we going to pay for better news in the coming century? Are we going to pay for it now, when media is down and change can overwhelm the old controlled media that delivers more pabulum than hard news?

Having been in and around journalism, citizen journalism and publishing for a long time, let me suggest we stop talking about the ethics of providing complete and useful information to citizens of a democracy, which are barely changed by the requirements of social media and cloud computing technology, in isolation from the economics of journalism. If someone delivers great journalism on a regular basis, what does it cost to do it? What is it worth to you to get better news coverage of an important issue?

Let’s posit that if the journalism is “great” or even “good,” it will be ethical, and face the problem of paying for the change we want. Unethical reporting is not journalism.

Forget about advertising and the like as a means of support. What’s a solid source of useful reliable information worth to you? A dollar a month? Twenty dollars a year? I’d bet you’d pay more for great local coverage, whether your locality is geographic, including your own home town, or topical but global, such as global warming or eliminating pandemic disease.

For example, if you could count on someone to examine federal elections reporting for you and deliver all the articles you need to be fully informed about your reprsentatives’ potential conflicts of interest, as well as alerts via Twitter, Friendfeed or SMS, what would you pay? Or comprehensive coverage of your favorite baseball team in the context of the whole of Major League Baseball? Perhaps you’d like extensive research into the activity of the World Bank or the Department of Interior. How about your state legislature? Maybe you’d like grass-roots coverage of USAService.org projects in your region that included financial analysis of the use of funds—that costs money.

The cost of any of these specialties is a good living for someone doing the work, whether that is doled out in parts to members of a team or to a single individual. We can talk in terms of voluntary effort, but even that needs financial support and some organization and analysis that ties together all the bits and pieces, whomever might provide it. If the reporter makes their living some other way, the work of reporting becomes secondary and conditional—they can’t commit to deliver news no matter the time or cost if they have to work a day job.

The obvious potential bias of a “press” that can only work voluntarily, making it the playground of the wealthy, makes the benefits of a self-supporting independent media self-evident. The media that people complain about is the product of wealth investing in messages they would support. Any replacement of an egalitarian grass-roots funding with one rich man doling out largesse or investments will get you the same media we have today.

Let’s assume that a competent reporter delivering original reporting, not simply reworking other sources, is worth the same as a senior mid-level manager in a corporation, such as Microsoft or Google—they may make between $90,000 to $130,000 a year. We’re talking about a good source of information, someone that people find reliable and responsive to the community’s ideas. Remember, that could be $10,000 to nine to 13 people sharing the task of coverage or more to participants in a smaller team.

Of course, a smaller beat, such as a town or city’s government, might be less expensive to cover. These reporters working directly for the community could price the service any way they like. A kid covering Lakewood, Wash., where I live, might build a living that gives them a platform for covering the Washington State Legislature, a local industry or other “bigger,” more lucrative topic.

Good reporters have costs you might not envision when thinking of someone sitting at a desk, using the Internet to do research. For example, subscriptions to various publications and source of background information costs, at minimum, a few hundred dollars a month. Should the reporter need to travel to do any research, conduct interviews or collect information that is not available electronically, that’s a minimum of $1,500 per trip for airfare, plus a week’s food and lodging.

But, hold on, let’s say the reporter needs to file a Freedom of Information Act request? The last time I did it for a story on the National Security Agency, in the 1990s, it cost $7,500 to get the filing shepherded through the process and pushed to success by an attorney. A good reporter might also find themselves the subject to legal attacks or, if they cover a war, captured by insurgents—do you expect them to just languish unaided if they can’t deliver the news?

What isn’t necessary for the news to flow effortlessly these days is a big company to distribute articles and programming. They might be good at selling advertising, but that need not be part of the business of news, if we begin with the assumption that funding sources also have some influence over coverage—people reading and viewing may be carrying the freight.

The fully loaded cost of a great reporter doing great work, then, falls somewhere in the $180,000 range:

$130,000 salary and benefits
$4,800 a year in subscriptions and other information sources
$2,500 a month in travel
$1,250 a month in legal and insurance coverage
$179,800 total, and that’s before the cost of IT, telecom and office space

After salary and benefits, the average cost of supporting a reporter will range between $20,000 and $50,000 a year. This assumes they have no bonuses for great work or world-changing stories. Yes, they might write a book about that story to supplement their income, but this takes away from time that can be dedicated to uncovering the next story and contributes to the phenomenon of the celebrity journalist in sharp contrast to the beat writer. In short, if every other sector of the economy works best when people can compete for success and compensation, this one is going to take some incentives from readers/viewers and, even, collaborators and amplifiers who reblog, rewrite and extend the hard work of original research. It’s a system that the Creative Commons licenses could handily support.

How could we make this work? Obviously, legal, benefits and other general and administrative features of this process (such as getting bulk rates on travel and subscriptions), can be lowered by a distributed non-profit or cooperative organization. That entity could also handle distribution of compensation, handling the splitting of payments. This is critical, since it is most likely that supporters of reporting will want a collection of sources, not just one source. So, there might be a “Collective Press” feed on U.S. government, on the state of California, the auto industry, green energy, and so forth, the fees for which are split between many contributors.

Let’s also assume that the news should not be behind any kind of pay wall, that it should be freely accessible so that people can use and decide if they want to support the work. Added convenience or increased interaction would be the best way to reward supporting. My thought is to give supporters enhanced commenting, Twitter access to the reporter, and other benefits, such as forwarding with private discussion links.

In the simplest scenario, then, what does an independent journalism supported by the users of information, as compared to being designed to support the producer-of-information’s advertisers, look like?

How about this? Pay $1 a month or $12 a year to a reporter who has offered an online “contract” to deliver thorough coverage of a topic. They might ask for more, but they’d have to sell the idea, just as they do in editorial meetings today. In exchange, you’ll get alerts about new articles and comments by the writer through email, Twitter, Facebook, Friendfeed or SMS. Another feature would be a social page of your own, where your input to the feed is available, delivered to the reporter for their thoughts, and your own feeds to share with friends. The reporter benefits from these re-feeds by supporters as a form of marketing for their work.

Since this would likely be an entrepreneurial effort, reporters would have to start off building their communities, with the help of early supporters. We could rally around a reporter and get them started with commitments of $1 a month ($0.03 a day). A reporter offering to cover a major federal program that has significant impact on 500 companies and 5,000,000 people should be able to recruit 5,000 supporters after a few months.

Using the costs described above, the break-even point for a $130,000-salaried reporter would be 15,000 readers. That’s well within the realm of possibility for a reporter supported by a non-profit that lists their offerings and ensures payments will be fulfilled. Assuming that reporters will be subscribing to other reporters, some of this needs to be kick-started by the members of the “new press” finding one another.

I’ll commit right now to support 40 such reporters who will give me a unique, comprehensive and informed feed of information and analysis on subjects about which I want to keep apprised. The kind of quality and coverage I want is of higher quality than the momentary mentions of television and deeper than beat coverage in newspapers or magazines. And I want to discuss the topics I care about with informed reporters and other readers/viewers.

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